ET Awards 2014: Chandra Shekhar Ghosh is Entrepreneur of the Year for building Bandhan from scratch

The Reserve Bank of India’s decision to award Kolkatabased Bandhan Financial Services a banking licence along with IDFC surprised many people since better known companies such as Aditya Birla Nuvo, Bajaj Finserv and Reliance Capital missed the bus.

It is a measure of the microfinance lender’s efforts that it financed the dreams of a slice of the country’s 25 crore unbanked households while banks have failed to reach 42 per cent of them even after 45 years of bank nationalisation. Bandhan has created a pool of Rs 58 lakh poor borrowers since Chandra Shekhar Ghosh founded the company in 2001 and turned it into the country’s largest micro lender with outstanding loans of Rs 6,446 crore.

What makes Bandhan markedly different from its rivals is its ability to run a low-cost operation and provide loans at the most competitive rate in the microfinance space.

At present it lends at 22.4 per cent a year on reducing balance and the transition into a bank will allow it to reduce its lending rate.

"Bandhan has worked as a change agent for the rural poor," says Ghosh. "To serve people is a major challenge and our employees have lived up to the challenge selflessly and helped Bandhan to rise to this level."

With just Rs 2 lakh in pocket, Ghosh set up the microfinance institution, which acquired the non-banking finance company licence in 2006.

The ET jury has recognised Ghosh’s organisation from scratch, that too in a difficult business.

RBI’s stamp of approval in granting the company a banking licence after rigorous due diligence also weighed heavily in his favour.

As a bank, Bandhan will have access to low-cost savings deposits which will help it reduce lending rates in the future. With its conversion into a bank, 30 lakh of its existing borrowers who don’t have bank accounts till now will come into banking fold automatically.

Ghosh received a major boost in 2011 when International Finance Corporation picked up 10.9 per cent in Bandhan for Rs 135 crore, reinstating faith in India’s embattled microfinance sector.

The company’s net worth stands at Rs 1,100 crore, more than double the RBI’s prescription of Rs 500 crore for acquiring a bank licence.

Of this, pure equity is Rs 96 crore, with capital adequacy ratio at a comfortable 21 per cent.