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Joining the fray of financial companies that have received banking
licence is Infrastructure Development Finance Company (IDFC) Ltd. On July 24, the
financial company announced that the Reserve Bank of India had granted it a
banking licence, making it the second financial institution to enter the banking scene in more
than a decade.
IDFC came into existence in 1997 and has been providing
services ranging from infrastructure financing, infrastructure development and
investment banking. It was set up by the Government of India as a financier to
spur private sector’s involvement in infrastructure development in the country.
Along with IDFC, Indian microfinance company Bandhan
Financial Services is the only one to have been granted preliminary bank
licence in 2014. In June, Bandhan declared that it will begin banking operations
in August in Kolkata, where it is headquartered. Director of the firm, Chandra
Shekhar Ghosh stated that the plan is to open around 500-600 branches across
India with a special focus on the east and north-eastern parts.
Bandhan recently raised Rs.1,020 crore equity from
International Finance Corporation, Singapore’s sovereign wealth fund GIC, and the
state-run Small Industries Development Bank of India (SIDBI). Due to this, its
net worth has risen to Rs.2,700 crore, more than the RBI’s stipulation of a minimum
capital base of Rs.500 crore for new banks.
Millions of people in India do not have the know-how of and access
to organised banking services. The move to grant new bank licence is seen as
the beginning of a cautious experiment to create more competition in a sector that
is heavily controlled by state lenders, many of which are reluctant to expand
into un-banked rural areas or towns.
Over the years, Kotak Mahindra Bank, IDBI, ICICI, HDFC are some
of the financial-institutions-turned-banks.
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