The story starts when Chandra Shekhar Ghosh saw a money-lender give Rs 500 to a vegetable seller at a local market and pocket an interest amount of Rs 5 upfront. Bothered by this whopping interest rate of 1% a day, Ghosh asked the shopkeeper why he took money at such a high rate. The answer opened his eyes. “What is the alternative?”, the vendor asked. “No institution lends me Rs 500 or Rs 1,000. The money lender gives it to me at my business place and collects it also from my business place. I do not have to travel. No signatures are needed. No guarantor as well”, the vendor was perfectly happy with the arrangement.
This was what Chandra Shekhar Ghosh took away from the encounter – why not offer a door step service for small ticket loans at a much lower interest rate.
In a conversation with Business Today global business editor Udayan Mukherjee, the MD & CEO of Bandhan Bank revealed that this and the motto ‘Small is Beautiful, Big is Necessary’ were what inspired him to make it big. He had to think big to make an impact on the society.
According to Ghosh, his micro-credit operation was fully dependent on funding from banks. “I tried to reduce rates, but the cost was too high. I was told that I could not attract low-cost deposits without a bank licence. When opportunity opened for one, I applied, and I got one”, says Ghosh. He adds that the Bank now has operations in all 34 states and UTs and deposits have allowed him to reduce the lending rate to his micro-credit customers to as low as 4%.
‘POOR WHO PAY ON TIME’
The Bandhan Bank MD & CEO insists that the economic vulnerability of his customer base does not make them high-risk. “For the entire 22 years we’ve been serving them, before the pandemic, up to 2020, I have written off just Rs 68 crore. We faced all kinds of crisis, but I lost only Rs 68 crore”, reveals Ghosh. He tells Udayan, “I have confidence that these people will return the money. Sometimes they may want extra time. They say we’ve been with you 10-15 years, give us some time, we will return the money.” There is after all logic to this as well. Ghosh says, “What is their alternative? Will they go to moneylenders and pay 10% a month? I always believed in this segment of the customers. I am not the least worried.”
The Bandhan Bank chief fondly recalls stories of enterprising women in West Bengal and Chhattisgarh who took the plunge are now reaping the benefits of years of hard work and cheap finance.
HUMBLE BEGINNINGS, HUMBLER LESSONS
Chandra Shekhar Ghosh started with working at his father’s tiny sweet shop. This was where he learnt his first big lesson in finance. “My father put me in the shop to keep a watch on customers who are eating and not paying correctly. This helped me learn that monitoring is the best way in finance”, recalls Ghosh with a chuckle adding that he learnt the secret of ‘supervisory credit’ on the shop floor. This includes the weekly supervision, collection and monitoring of loans.
The second lesson, he attributes to his mother. “Every mother is a CFO but they are not a CA. Especially in families where the income is lower than the demands. It is the mother who must juggle finances to meet everyone’s demand and fulfil their basic needs”, says Ghosh. He reveals that he learnt the basic lessons of finance from the lady of his childhood house.
GOOD BUSINESS SENSE
Contrary to what many may think, the Bandhan Bank MD & CEO insists that servicing the bottom rung of the society makes perfect business sense. “People who take small ticket loans are seeing their incomes enhancing and lifestyle changing. Their ticket size and demands are also increasing. They return to us for bigger loans. This helps us diversify products and mitigate the risk across all geographies”, says Chandra Shekhar Ghosh.
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