ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bandhan: Can It Replicate Its Microfinance Success?

When banks are struggling to reduce bad loans, Bandhan, with a recovery rate of more than 99.5% in microfi nance, has entered the banking industry. Will its microfinance experience help it meet the challenges of mainstream banking?

Bandhan Financial Services started full-fledged commercial banking operations on 23 August 2015. It received “in principle” approval last year in April alongside the Mumbai-based Infrastructure Development Finance Company (IDFC), to set up a bank. Bandhan has been working as a microfinance institution (MFI) for the past 15 years and will be the first such to be converted into a bank in this country. Its emergence as a bank happens at a time when the Indian banking industry is experiencing a steep rise in non-performing assets (NPA).

This rise over the past few years, primarily of the public sector banks (PSB) is a matter of concern. Overall the NPAs or bad loans, including private sector lenders, increased from 2.43% in 2012 to 4.04% at present. The gross NPA of the PSBs alone is even worse, rising from 2.77% in 2012 to 5.08% in 2015. The rising NPAs have set alarm bells ringing all across.

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