Bandhan Bank's dream market debut: How Chandra Shekhar Ghosh made the leap from his father's sweet shop to banking

To use a clichéd term, Bandhan bank has made a dream debut on the Indian bourses. On Tuesday, the Bandhan scrip got listed at Rs 499 on the National Stock Exchange (NSE), a 33 percent premium to the issue price of Rs 375. The bank’s Rs 4,473 crore IPO was subscribed 14.62 times. If one looks closer, Bandhan has an interesting set of financial metrics when compared with those of other banks despite its small loan book size. For instance, it’s market capitalisation now stands at Rs 56,921 crore, making it the eighth-largest bank among all the listed banks in India. When compared to the market caps of government-owned banks, Bandhan now ranks behind the State Bank of India, and when compared with market caps of private sector banks, Bandhan figures at the seventh position. The bank, which had 887 branches and 430 ATMs as on December, 2017, is the latest entrant in India’s commercial banking space. It is just one of two entities that were given full-service banking licences by the Reserve Bank of India (RBI) in April 2014, from a list of 25 aspirants that included big business houses. The other is IDFC. Bandhan’s core focus is the rural customer, and the rural market has been the lender’s stronghold since its early days as a microfinance entity serving the poor in far flung villages, primarily in eastern India. [caption id=“attachment_2336066” align=“alignleft” width=“380”] Bandhan bank has made a dream debut on Indian bourses. File image of Bandhan Bank chief Chandra Shekhar Ghosh.[/caption] In many ways, the bank’s classy debut reminds one of the rise of its founder Chandra Shekhar Ghosh. Ghosh was born into a family of Bangladeshi refugees. Back in the day, Ghosh was raised with limited resources as the family had only a tiny sweet shop to bank on. Ghosh’s father worked hard to provide his son with formal education, and managed to send the boy to Dhaka University to study statistics. In 1985, Ghosh started working for BRAC, an international development agency based in Bangladesh. The organisation trained him and appointed him as a field officer in one of the most poverty-stricken areas of Bangladesh. Later, Ghosh involved himself with several NGOs working with the poor in West Bengal. That period introduced Ghosh to the world of microfinance. In the years that followed, Ghosh learned the nuances of microfinance and set up Bandhan in West Bengal. Ghosh started out in 2001, giving tiny loans to help the poor in Kolkata’s suburban Konnagar town.

He started off with Rs 1.75 lakh borrowed from a local moneylender, at an interest rate of 7.5 percent per month, and an additional Rs 25,000 borrowed from his sister and brother-in-law. That was the only capital he had for his work as no commercial bank was willing to lend him money. In the early days, Ghosh had two staffers  — Partha Samanta and Fatik Bera. The group pushed out small loans, as small as Rs 1,000, to poor borrowers in Konnagar and the nearby Bagnan area. In the initial days, Ghosh used to charge a flat interest rate of 15 percent. The borrowers hardly understood the concept of a loan without collateral. Until then, they had only dealt with money lenders who snatched their collateral when they failed to pay back. Today, with an asset base of Rs 30,236 crore (as on FY 17), Bandhan now occupies the seventeenth position among private sector banks and the thirty-eighth position among all banks. It had negligible gross NPAs (non-performing assets) as on 31 March, 2017, at Rs 86.26 crore or 0.51 percent of total advances. Its total advances stood at Rs 16,839 crore at the end March 2017. At the end of the day’s trade on Tuesday, Bandhan Bank’s shares finished at Rs 477.20,  up 27 percent over its issue price of Rs 375, and after touching an intra-day high of Rs 498.40, or 33 percent higher than its issue price. Bandhan has made a classy start. This is also the success story of a man, who started off very small, working from his father’s sweet shop, and has now become the founder of one of the newest private banks in India. (Editor’s note: Part of this story was published earlier. Data is contributed by Kishor Kadam)