IFC, Singapore’s GIC invest Rs1,600 crore in Bandhan Financial Services

Mumbai: Bandhan Financial Services Pvt. Ltd has raised Rs.1,600 crore from two international institutional investors to help convert its microfinance business into a full service bank.

Bandhan was one of the two entities to get a banking licence in April 2014 along with infrastructure finance company IDFC Ltd. The approval was valid for 18 months.

Bandhan chief executive officer C.S. Ghosh said his company raised Rs.580 crore from International Finance Corp. (IFC), a World Bank group member, and another Rs.1,020 crore from GIC Pvt. Ltd, the sovereign wealth fund of the Singapore government.

However, Ghosh did not disclose the stake that these two entities have picked up. IFC already has a 10.8% stake in Bandhan, but this is the first investment by GIC, he said.

According to existing rules, foreign investors are allowed to hold up to 74% in private sector banks but their voting rights are restricted. The Banking Laws (Amendment) Bill, 2012, which was cleared in 2013, allowed the Reserve Bank of India (RBI) to raise the limit on voting rights from 10% to 26% in a phased manner.

Ghosh said Bandhan did not find any domestic institutional investor who could put so much money at one go, and thus had to approach foreign investors.

The investment will be for the long term, and will be used to open 600 branches across the country, and to put in place IT infrastructure and strengthen the human resource base in the bank, Ghosh said over the phone.

The 600 branches will be spread across 27 states but more than 50% of it will be in rural areas. The bank will be inaugurated by September, Ghosh said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.