Bandhan Microfinance is one of the largest microfinance institutions in India that provides financial services like loans, insurance, and other services to low-income individuals. It started in 1995 and has expanded to over 2,000 branches across 22 states. While Bandhan has been very successful as an NBFC-MFI, transforming into a bank could allow it to better serve its customer base of over 5 million and help achieve its mission. However, becoming a bank would also present challenges around increased regulatory compliance, developing new banking capabilities and systems, and higher costs of operations. With proper strategic planning around expanding services, training employees, and leveraging its existing brand and customer base, Bandhan appears ready and well-positioned to successfully

1. BANDHAN
MICROFINANCE
IS TRANSFORMATION TO BANK STATUS REQUIRED?

2. Case facts
 Bandhan Financial Services Pvt Ltd. was known as Ganga Niryat Pvt Ltd (an NBFC) set up in 1995
 Due to sustainability issue ventured into micro credit activities in north eastern states of India (2006).
 In 2007 GNPL was renamed Bandhan. It started its first branch in Konnagar.
 Currently Bandhan is registered with RBI as a non deposit taking NBFC.
 Bandhan is operating in 2,016 branches, 22 states and union territories.
 It had started with 12 staff and 1143 borrowers to currently around 13000 staff, 5.2 million borrowers, 9.3
million insurance subscriber and 0.2 million pension scheme subscribers 2012-2013.
 Largest and most profitable MFI in India.
 Business Model: Individual lending through group formation model.

3. Q1.Why are MFI`s required? Delineate the unique, celebrated role of
MFI`s in developing economies?
 MFIs are required since they provide financial services (Loans, Insurance & Other Services)to the poor and
bpl population and is also viewed as a poverty elimination tool.
 MFI in developing Economies:
1. Access to credit (Education, Business, Marriage etc.)
2. Fight the financial inequality
3. Create employment
4. Creates habit of saving
5. Empower poor families and women
6. Improve standard of living

4. Q2. How has Bandhan achieved its scale since inception?
 The loan is provided to individual members and the group acts as a tool to control.
 Group Model is followed by the firm which is customer centric, simple and aims at maintaining
relationships.
 Focused on relationship with customers.
 Operating in 80% in rural and 45% in non-banked areas.
 The loans provided to customers were not backed by any collateral but involvement of co-borrower
reduced the risk.
 Institutionalized mechanism to avoid multiple lending and thereby avoid excess indebtedness among
customers.

5. Q3. What are the factors constraining Bandhan and the scope of
Bandhan to remain viable as a NBFC-MFI? Evaluate these with
consideration of the crises in the micro finance industry?
 Excess no of branches in West Bengal (802), Assam (285), Bihar (257)
 Organisation Structure (Complex)
 Well Built IT- Infrastructure with accounts and loan portfolio maintained at branch, regional and head office levels.
(MFSOL built in-house)
 To overcome the crisis in micro finance industry the Bandhan bank can:
1. Refine the training strategies and awareness campaigns.
2. Maintain separate special workforce to focus on risky or problematic portfolio.
3. Ensure proper communication and transparency.
4. Set up grievance cell.

6. Q4. Should Bandhan transform into a Bank? What are the implications
of this for its vision. Mission and the organization?
 Yes. Bandhan should transform into a bank because:
1. Good turnover and assets so can proceed to be a bank.
2. Well established customer base (80% in rural and 45% in non-banked areas)
3. Tie ups with LIC, Western Union, PFRDA, NPS.
4. Good brand image, customer centric and good product offerings.
Implications:
1. They will have to follow regulations by the RBI (maintain CRR and SLR)

7. Q5. Is Bandhan ready to be a bank? What challenges do you envisage
Bandhan would face during such a transformation? How Bandhan can
overcome them?
Yes. Bandhan is ready to be a bank.
Challenges
1. Increase in cost of operations.
2. Unaware about banking activities.
3. Currently they have in-house software, later they will have to develop core banking software.
Overcome?
1. Outsource few activities.
2. Cost of funding will reduce since it will be a bank.
3. Training to employees

8. Q6.What should be the transformation plan for Bandhan to get
converted to a bank?
 Cut down branches in West Bengal, Assam, Bihar and open in other areas.
 Create awareness and also a competitive interest rate to encourage deposits.
 Can start payment bank. (Restricted deposit of 1Lakh. Cannot issue loans and credit cards).
 Can diversify into gold loans, SME finance, vehicle financing etc.

9. THANK YOU