Every mother is CFO, learned basic lessons from her : Bandhan Bank MD & CEO
The story begins when Chandra Shekhar Ghosh witnessed a pawnbroker giving 500 rupees to a vegetable seller in a local market and pocketing an interest amount of 5 rupees in advance. Annoyed by this huge interest rate of 1% per day, Ghosh asked the trader why he was taking money at such a high rate. The answer opened his eyes. “What is the alternative?” asked the seller. “No institution lends me Rs 500 or Rs 1,000. The lender gives it to me at my place of work and also collects it at my place of work. I don’t have to travel. No signature is required. Also no guarantor,” the seller was perfectly happy with the arrangement.
This is what Chandra Shekhar Ghosh took away from the meeting – why not offer a door-to-door service for small loans at a much lower interest rate.
In a conversation with Business Today’s Global Editor, Udayan Mukherjee, the Managing Director and CEO of Bandhan Bank revealed that this and the motto “Small is Beautiful, Big is Necessary” was what inspired him to do it big. He had to think big to have an impact on society.
According to Ghosh, his microcredit operation depended entirely on bank funding. “I tried to reduce the rates, but the cost was too high. I was told that I could not attract low cost deposits without a banking license. When the opportunity came for one, I applied and got one,” Ghosh says. He adds that the Bank now has operations in all 34 states and that UTs and deposits have allowed it to reduce the lending rate to its microcredit clients to as low as 4%.
‘POOR WHO PAY ON TIME’
The Managing Director and CEO of Bandhan Bank insists that the economic vulnerability of its clientele does not make them high risk. “For the whole 22 years we served them, before the pandemic, until 2020, I wrote off just Rs 68 crore. We faced all sorts of crises but I only lost Rs 68 crore,” reveals Ghosh. He told Udayan, “I trust these people will return the money. Sometimes they may want extra time. They say we have been with you for 10-15 years, give us time, we will return the money to you. After all, there is a logic to this too. Ghosh said, “What is their alternative? Are they going to go to loan sharks and pay 10% a month? I have always believed in this customer segment. I’m not the least bit worried.
The head of Bandhan Bank fondly recalls the stories of enterprising women from West Bengal and Chhattisgarh who took the leap and are now reaping the rewards of years of hard work and cheap finance.
HUMBLE BEGINNINGS, HUMBLE LESSONS
Chandra Shekhar Ghosh started out working in her father’s small candy store. It was there that he learned his first big lesson in finance. “My dad put me in the store to check on customers who were eating and not paying properly. It helped me learn that supervision is the best way to fund,” Ghosh recalls with a laugh, adding that he learned the secret of “supervised credit” in the workshop. This includes weekly supervision, loan collection and monitoring.
The second lesson he attributes to his mother. “All mothers are CFOs, but they are not CAs. Especially in families where income is lower than demands. It’s the mother who has to juggle finances to meet everyone’s demand and meet their basic needs,” says Ghosh. He reveals that he learned the basic lessons of finance from the lady of his childhood home.
GOOD BUSINESS SENSE
Contrary to what many might think, the CEO of Bandhan Bank insists that serving the bottom rung of society makes perfect business sense. “People who take out small loans see their income increase and their lifestyle change. Their ticket size and demands are also increasing. They come back to us for larger loans. This helps us diversify products and mitigate risk across geographies,” says Chandra Shekhar Ghosh.
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