Emergence of Bandhan as a bank: A new era in the Indian banking industry
Description
At a time when the Indian banking sector is witnessing a sharp rise in non-performing assets (NPAs), Bandhan—formerly a microfinance institution (MFI) with a near 100 percent loan recovery rate—has successfully transitioned into a commercial bank. Based on a survey of 112 Bandhan clients in West Bengal, this study highlights the key features of Bandhan’s lending model that have enabled it to maintain negligible levels of bad loans. Established as an MFI, Bandhan began full-fledged banking operations on 23 August 2015, marking a significant development in India’s financial landscape. During this period, overall NPAs in the banking system rose from 2.43 percent in 2012 to around 4.04 percent, with public sector banks experiencing an increase from 2.77 percent to 5.08 percent. Against this backdrop, Bandhan’s success is attributed to its strong borrower screening, close client relationships, group lending mechanisms and disciplined repayment culture. The study underscores how innovative microfinance practices can contribute to financial stability and offers lessons for improving asset quality in the broader banking system.
Copyright Date
August 2015
Publication Date
27-8-2015
Publisher
International Growth Centre (IGC); Tata Center for Development (TCD)
Keywords
Banking, Financial services, Banking industry
Source Link URL
https://www.ideasforindia.in/topics/money-finance/emergence-of-bandhan-as-a-bank-a-new-era-in-the-indian-banking-industry.html
