I have some stupid doubts regarding merger of Bandhan and Gruh that need clarifications-
Annual report page no 51 states- The Scheme contemplates the amalgamation of Transferor Company into and with the Transferee Company and the dissolution without winding up of the Transferor Company pursuant thereto
What does this mean in simple english?
The appointed date for the Scheme shall be January 01, 2019, or such other date as may be mutually agreed between the Transferor Company and Transferee Company and is the date with effect from which the Scheme shall be operative.
What is the meaning of this sentence? My understanding is that share swap ratio of 568 Bandhan Shares to 1000 Gruh Shares. But i could not understand the appointment date of the scheme of January 1, 2019. So what happens when one buys Gruh Shares after January 2, 2019?
65% issue is not understood correctly, The explanation from Finance Ministry should douse it off for time being & knee jerk reaction in certain equities.
Bandhan promoters anyways have to reduce the holding to 40% as mandated by RBI for all banks. With Gruhâs acquisition they will bring down the holding to 60.x%. To reduce it to further 40%, Bandhan promoters are yet to provide any guidance.
Above is old interview of Muhammad Yunus pioneer of Micro finance. He talks about indian MF , I have selected some experts from interview
One of our biggest MFI, Bandhan is becoming a bank. Do you think that should be the natural progression for an MFI? Grameen also became a bank.
Grameen started as a bank, it did not become a bank. Grameen Bank law is not the standard banking law. Standard banking law creates banks for the rich, you cannot create a bank for the poor with that law. Banking law is an architecture for a long haul supertanker ship. But microcredit in that sense is a dinghy. Bandhan doesnât have a dedicated law, so they went to the supertanker route and created a bank. They said we will use this supertanker and carry the work of little things. But supertanker goes in deep ocean and go long distances, while dinghies operate in shallow water. MFIs go in rural, semi-urban places. Although your motive was right, sooner or later you will feel the pinch. Because the law will tell you what you can do and what you canât do. After becoming a bank, you may have to take collateral. Poor borrowers will tell you they donât have collateral, but now that you are a bank, without collateral the law prohibits you from lending.
Secondly, even if you are doing a good job in microcredit, someone may say why donât you give a million-dollar loan to a big company? You have the licence to do it! At the moment you may not be looking into such a possibility, but sooner or later, some expert will advise you about such big opportunities. You will start with just one big loan and gradually microcredit will become your token activity. I am not saying it will happen, but this is the danger. The Bandhan team is a set of very dedicated people, I know them well. So far it is OK, but the possibility of deviating from the goal is always there.
Giving banking licence could be an interim solution, but not a permanent solution to serve the poor. Because commercial banking and microcredit banking are not the same.
That way we have already introduced payments banks.
But they cannot take deposits. Thatâs the key! Lending is easy, but who is giving you the money to pay? If I can take deposits, I am on my two legs, otherwise I am on one leg.
The bank opened 50 new branches & 250 new DCSs in FY19.
What I found interesting was distribution of branches in states - WB (369), Bihar (85), Assam (73), UP (65), MH (54). Most other banks have maximum number of branches in MH, GJ, KA, TN.
71% of Branches + DSCs are in rural & semi-urban places.
The bank keeps talking about requirement of 2 crore houses in affordable segment & only a small percentage of those are built. This is claimed as next big opportunity.
Bandhan is one of the few institutions which is passing on the benefit of reduction in cost of funds to micro banking customers. The interest rate the day before the bank was started for micro banking customers was 22.4% & now it has come down to 18.65%. Most mid sized businesses looking for secured term loans will get interest rate of 13-14% & Bandhan is giving out unsecured loans at 19%.
Another thing I noticed is 6% interest on SA accounts. It seems bank has taken a leaf out of Kotak bank strategy & the numbers are showing up.
The bank sold ~29k Cr of PSLC assets & it got the PSLC fee income of 309Cr (+ 104%). The assets sold under PSLC vs. total final assets sound too high to me.
Bank stopped sourcing new loans in small enterprise loans (SEL) for a few months due to turbulent times faced by the small enterprises. The bank is changing the product, sourcing & decision model in this segment. The loan book degrew in this segment. Ability to stop or pull back from one sector is an important aspects to track in financial companies for me.
Another policy I found intriguing was if the group meeting are suspended, then installments are deferred. The bank does not count these overdue amounts for NPA classification.
Another new aspect I found in AR was Inter Bank Participation Certificate (IBPC). The bank has 4541Cr of assets in this category & it also earns some other income from this. The idea seems like - risk sharing with pooling of assets with other banks. I need more understanding on this aspect.
Would like to add one more point regarding distribution of branches(states) in which bandhan operate have some of the lowest credit deposit ratio as per NITI Ayog
WB 61.63
Assam 37.73
Bihar 32.8
UP 44.4
Implication credit part has long runway for bandhan
Appointment date is different from record date (which decides the eligibility of share allotment to gruh shareholders) . The scheme of merger will be retrospectively applied from 1st Jan 2019 - i.e. the financials / balance sheet etc will be merged from this date
Key Highlights :
ďDeposit portfolio grew 42.33% YoY
ďLoan portfolio(on book + off book) grew 39.36% YoY
ďCASA grew 44.73% YoY
ďCASA ratio at 36.06% against 35.46% YoY
ďAdded 7.08 lakh customers during the quarter;
total customer base grew by 26.52% YoY to 1.73crore
ďGNPA as on June 30, 2019 at 2.02% against 2.04% in March31,2019 and 1.26% as on June 30, 2018
ďGNPA (excluding one large Infrastructure account) stood at 1.11%
ďNet NPAs as on June30,2019 at 0.56% against 0.58% in March 31, 2019 and 0.64% as on June 30, 2018
ďCapital Adequacy Ratio (CRAR) at 27.03%; Tier I at 25.75% and CET 1 at 25.75%
I couldnât understand how Bandhan is able to grow CASA so fast and furious when all other banks are not able to.
If anyone has the understanding, please share.
I believe Bandhan caters to ordinary by giving loans. Micro loans has higher interest rate and highest recovery rate. There is big credit crunch in ordinary towns and villages and I believe Bandhan caters to that. Even before listing it was growing in fast pace.
Reason is mass business of small savings with door step service. Most people are afraid to go to bank as they can not fill withdrawl. Bandhan is giving door step service.
Beauty of a clean running bank by more cleaner management. They have a strong customer base and getting bigger.
Large chunk of senior citizen is showing interest on Bandhan and putting their money. My recent visit to their branch giving me this impression. They have stretched their FD tenure.
Beauty of a clean running bank by more cleaner management. They have a strong customer base and getting bigger.