Bandhan Bank became Full-fledged Bank


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Bandhan Bank in August 2015 began operations as a full-fledged bank (Universal Bank) with 501 branches, 50 ATMs and 1.43 crore accounts across the country, becoming the newest member of the estimated USD two-trillion Indian banking industry. State-wise, West Bengal has the maximum number of branches 220, followed by Bihar 67, Assam 60, Maharashtra 21, Uttar Pradesh and Tripura 20 each, and Jharkhand 15.
The Kolkata-headquartered bank has two divisions - micro banking and general banking - and will offer complete retail financial solutions, including a variety of savings and loan products.
Bandhan Bank is the first instance in India of a microfinance entity transforming into a universal bank. It received an in-principle approval from the RBI in April 2014 and the banking regulator’s final nod on June 17, 2015. Its investors include IFC, SIDBI and Caladium Investment Pte.Ltd, a company managed by GIC Special Investments Pvt Ltd. Bandhan was set up in 2001 to address the dual objective of poverty alleviation and women empowerment.The microfinance activities are carried on by Bandhan Financial Services Pvt. Ltd. (BFSPL), incorporated under the Companies Act, 1956 and also registered as a Non Banking Financial Company (NBFC) with the Reserve Bank of India (RBI). It transformed itself into a non-banking finance company in 2006.
However, the Indian banking sector is highly fragmented with 46 commercial banks jostling for business with dozens of foreign banks as well as rural and co-operative lenders. State banks control a significant chunk of the market share.
The savings bank account interest rate has been fixed at 4.25 per cent for balance up to Rs. 1 lakh and 5 per cent for balance above Rs. 1 lakh. For term deposits, the maximum interest rate has been fixed at 8.5 per cent for 1-3 years, with an additional 0.5 per cent for senior citizens.
The RBI licensing norms stipulates that a new bank must have at least Rs. 500 crore capital. Against this, Bandhan has started with Rs. 2,570 crore capital which will soon be ramped up close to Rs. 3,052 crore.
What Bandhan Bank offers?
Savings account: Bandhan Bank offers 4.25% per annum on savings account for deposits below Rs.1 lakh and 5% for deposits above Rs.1 lakh. As of now, major state-run and private sector banks offer 4% per annum on savings account deposit.
Some banks, including Yes Bank Ltd, Kotak Mahindra Bank Ltd and IndusInd Bank Ltd, offer 5-7% per annum on savings deposit, depending on the amount.
Currently, Bandhan Bank offers seven types of savings account including an account for the differently-abled. Unlike major private and state-run banks, there is no charge for non-maintenance of a minimum average balance.
Fixed deposits: The bank is offering 8.50% per annum on fixed deposits (FDs) that mature in one to less than three years. Senior citizens will get an additional interest of 50 basis points (bps). One bps is one-hundredth of a percentage point.
In the past six months, major banks have cut interest rates on FDs. In fact, the fall in bank FD rates has been such that they now offer lower interest than small savings schemes such as Post Office Monthly Income Scheme and National Savings Certificate. For instance, State Bank of India is offering 7.75% per annum on FDs for 5 years and above. In comparison, the 5-year National Savings Certificate offers 8.50% per annum.
Base rate: Bandhan Bank has set its base rate at 12% per annum. Base rate is the minimum rate at which banks can lend to its customers. Currently, the base rate of major commercial banks has slid below 10%.
Loans: Right now, the bank is offering home loans, loans against property, two-wheeler loans and overdrafts against term deposits.
The interest rate on the home loan and loan against property are linked to the base rate. There will also be a processing fee of 1% or a minimum of Rs5,000 on the loan amount plus service tax, whichever is higher. Service tax is 14% of the processing fee amount.
In case of two-wheeler loans, you will have to pay 3% of the loan amount as processing charge.
Branches: The bank so far has 501 operational branches, most of them in rural or unbanked areas. Some of the branches will remain open all seven days a week. Bandhan Bank will also focus on doorstep banking, under which it will reach out to customers instead of the customers visiting the branch.
Automated teller machine: As on Monday morning, the bank has about 50 operational ATMs. Customers with a premium or special savings account will get unlimited free transaction access to Bandhan Bank’s ATM as well at ATMs of other banks.
Cards: The bank is currently offering five variants of debit cards on Rupay platform and plans to offer Visa-enabled debit cards soon. The next would be prepaid cards, followed by credit cards.
Mobile app: The bank has done a soft launch of its mobile app for its select customers. We will have to wait and watch for the features of the app.
Locker: You can even avail the locker facility at a minimum cost of Rs.1,000, compared with the minimum charge ofRs.3,000 in some large commercial banks.
Third-party products: Currently, the bank doesn’t offer products third-party products such as insurance and mutual funds.



Thursday, 27th Aug 2015, 09:41:27 PM

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