Bandhan raises equity of Rs135 crore from IFC

The investment would help Bandhan shore up its networth to nearly Rs650 crore by March 2012

Microfinance major Bandhan today announced that it has successfully raised equity worth Rs135 crore from International Finance Corporation, the investment unit of the World Bank.  

The investment would help Bandhan shore up its networth to nearly Rs650 crore by March 2012. Bandhan is projected to reach out to 6.5 million customers with a loan book of Rs5,000 crore maintaining minimum capital adequacy ratio (CAR) of 17%.

"Bandhan already has SIDBI, a highly reputed national financial institution as its investor. We are delighted with IFC coming in now as an internationally acclaimed institution. Equity infusion by IFC will help us increase our capital not only to reach out to additional 1,000,000 poor but also help build world class good governance and system. We are happy that like-minded institutions are joining hands to address the common objective of development of the poor," said Chandra Shekhar Ghosh, chairman & managing director, Bandhan.

"Bandhan is a great partner to work with. We are privileged to have the ability to participate in the important work being done by Bandhan in West Bengal and other low income states of India to promote financial inclusion, one of the key strategic priorities for IFC in India," said Thomas Davenport, IFC Director for South Asia. "Bandhan's work in microfinance reflects the difference that can be made to under-served rural and semi-urban communities who have not had access to financial services traditionally. We are delighted to be able to contribute to Bandhan's efforts."

The plan is to reach out to nearly 1,000,000 poor women with this assistance coming in from IFC. Company projects to disburse Rs5,300 crore during FY11-12 and increasing its loan book to Rs3,200 crore by March 2012. This support from IFC will help in contributing to employment creation, poverty reduction and providing capacity building support to further strengthen governance, risk management, IT system, product development, environmental and social standards so as to ????establish best practices and make Bandhan an ideal institution.

Bandhan Financial Services Pvt Ltd is registered as a non-banking financial company (NBFC) with the Reserve Bank of India (RBI) and incorporated under the companies Act 1956. The last equity infusion in the company was by one of its largest lenders, SIDBI to the tune of Rs50 crore thereby making them its investor in December 2009.


Experian Credit Information appoints Mohan Jayaraman as managing director

Mohan Jayaraman will be responsible for leading Experian’s Indian Credit Bureau joint venture into its next growth phase by further accelerating the roll out of Experian’s global products and services in India

Experian Credit Information Company of India Pvt Ltd, the first CICRA licensed credit bureau in India, has announced the appointment of Mohan Jayaraman as managing director. He will be responsible for leading Experian's Indian Credit Bureau joint venture into its next growth phase by further accelerating the roll out of Experian's global products and services in India.

Mohan takes over from Phil Nolan, who will take up the role of managing director of the recently established Experian Credit Bureau Joint Venture in Australia. Mohan Jayaraman joined Experian in November 2010 as the chief operating officer. Prior to joining Experian, Mohan worked with ICICI Bank for eight years in various senior management roles. His most recent position was joint general manager and head of payment solutions, enterprise analytics and retail structured finance.

Experian helps organisations to leverage data and analytics to better manage the risk and reward of their commercial decisions. Experian Credit Information Company of India Private Limited currently has more than 150+ members including private sector, public sector, cooperative banks, regional banks and NBFCs.


Voluntary part of the New Pension System enlists only 51,000 members

Even the Rs1,000 giveaway announced by the FM in the 2010-11 budget to potential savers has failed to make them join the NPS. It is obvious that potential investors tend to shun market volatility and prefer guaranteed returns

Only around 51,000 people have subscribed to the 'voluntary' part of the New Pension System (NPS), according to the information provided to the Standing Committee of Parliament, which was examining the PFRDA (Pension Fund Regulatory and Development Authority) Bill of 2011. In May 2009, NPS was thrown open to the general public. The subscription level so far has been abysmal-and does not seem to reflect any investor interest in the product. Worse, despite the government's offer of putting in Rs1,000 for every new account opened under the 'Swavalamban' scheme, there have been few takers. This is contrary to the fact that the scheme architecture was designed to make it attractive to the general public.

Seeing the volatility in returns in the schemes of the NPS, it seems that the scheme has been spurned by investors looking for guaranteed returns.

In a recent article dated 2nd September, (Returns from New Pension System schemes are hugely volatile:) we had discussed how the NPS had been launched for all citizens of the country—including workers in the unorganised sector-on a voluntary basis, with effect from 1 May 2009. But returns for the unorganised sector have been abysmal and extremely volatile.

Subscribers to the NPS have an option of choosing one out of the six PFMs (pension fund managers). For May 2009-March 2010 and FY2010-11, the returns for unorganised sector workers of six PFMs ranged between 12.52% and 1.82% for government securities (g-secs); 12.66% and 4.02% for corporate bonds and 25.94% and 7.95% for equity. This leaves investors confused as to which fund manager they should choose to get better returns. But more than choosing the right fund manager, investors would shun the scheme as returns are not guaranteed.

As on 31 March 2011, the total assets under management (AUM) by all PFMs totalled Rs8,585 crore. The non-government sector contributed less than Rs100 crore, of which a bulk has been contributed by two corporates—NALCO (National Aluminium Company Ltd) and NTPC (National Thermal Power Corporation)—which have migrated their employees' pension schemes to NPS. The lack of investor interest in the NPS is apparent.

Investors look for guaranteed returns. For the same reason, nearly 50% of household savings lie in bank deposits and 13% is in provident & pension funds. Just 4% is invested in shares & debentures, a clear indication that investors tend to shun volatility in the market. Investors fail to look at the long-term perspective and are turned off by the short-term volatility of the market. Volatility in returns is an inveterate part of the market, but over the long term, volatility is significantly reduced. This is overlooked by the average investor. What is lacking is adequate investor literacy.

Investors jump to any investment that has the word 'guaranteed' mentioned in it. For the same reason, hoards of individuals fall for chit funds and MLM (multi-level marketing) schemes, which promise them huge and 'guaranteed' returns. On the other hand, mutual fund schemes that have an established track record of providing 22% yearly compounded returns fail to find buyers, as the returns are not guaranteed.

Therefore, without proper investor literacy and guidance, it would be difficult to get subscribers. Investors need to be pushed to invest in market-linked products. At Moneylife we have constantly pointed out the decline in investor participation in mutual funds after the ban on entry loads. The reason being that prior to the ban, financial advisors used to actively sell mutual funds to investors—but after the ban, there was no incentive to advisors to induce investors to go in for any particular scheme.

The standing committee on finance which presented the PFRDA Bill recently is rightly concerned about the poor participation, as NPS schemes are market linked. Under the old pension scheme, a retiree is guaranteed a monthly pension amounting to 50% of the average of the pay drawn in the last 10 months of service and the facility of commutation. The committee has proposed that the investment guidelines should be framed by PFRDA in such a manner that besides the other financial instruments, an option would be given to the subscribers of the NPS where 100% investment in g-secs would be permitted. This would be similar to bank fixed deposits for investors as they would earn interest along with capital protection. But how far this would influence participation would still be a big question.




5 years ago

The real reason is that any product that does not assure returns like NPS or any other needs to be explianed and advised by an adviser who has good knowledge on the product and also how to service them well, when situations arise. Unfortunately, the NPS is willing to pay only Rs. 75 per application as fees to such an advisor. This is the crux of the problem. No one on the distribution and service functions (and asset management) are being remunerated for the service they are providing. Then how does one expect this to be a good product. Right now, all parties are just paying 'lip service' to this product. It has great potential, but it cannot be realised without a different remuneration strategy from what is currently being offered to stakeholders. I am sure investors understand this, but the PFRDA just doesn't want to believe they need to change from this lop-sided and failed strategy of low remuneration to stakeholders.


5 years ago

I have subscribed to NPS but due to negligence of Kotak Bank they did not deposit my check on time my Account has been deactivated. Now the CSR says that there is no way to activate it - which to me seems like the government officials are also not allowing worthy people to get into NPS scheme.

R Nandy

5 years ago

At an average Rs 600-700 per annum is the account related service charges for a few contributions per year.So,1000 Rs given by the gov is more or less lost in the service charges which is any ways two high for a person contributing below 12000 per year in the Swabhlambham scheme.I guess people in the unorganized sector are better off contributing in ppf. NPS is more for the middle classes contribution a considerable amount per year and also get 80C benefits with market returns in the long term.

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