Bandhan steps closer to full-fledged bank with funds from IFC, GIC

Bandhan Financial Services, a micro-finance company which along with IDFC received RBI's nod to set up a commercial bank (See: RBI grants 'in-principle' nod for bank licences to IDFC, Bandhan) to set up a general bank, has got equity commitments worth Rs1,100 crore from two entities – existing investor IFC, the private lending arm of the World Bank, and a new commitment from GIC, the sovereign wealth fund of Singapore.

Following this, Bandhan's capital base would increase from Rs2,100 crore to Rs3,200 crore, Bandhan's chairman and managing director C S Ghosh said in a statement, adding that this was well above the Reserve Bank-stipulated norm of Rs500 crore for setting up a new bank.

The capital adequacy ratio is 21 per cent at present, he said.

The Kolkata-based small lender had obtained an in-principle approval from RBI in April 2014 to set up a bank in 18 months' time.

"With this new investment, we will be able to launch a well-capitalised universal bank which can focus on building assets and manage risks properly," Ghosh said.

Bandhan plans to start banking operations by October.

GIC is investing Rs1,020 crore ($165.5 million) in Bandhan while IFC plans to infuse antother Rs580 crore, Ghosh said.

He declined to say how much stake GIC would get. IFC, part of the World Bank Group, owns 10.8 per cent of Bandhan and its stake will increase after the latest investment.

Bandhan and IDFC were the only two companies which won bank permits from the Reserve Bank of India last year in what was the first bank licensing process in a decade.