32 kg Excess Baggage

The conditional licence closed a cycle which had started on 1 July 2013, the day Bandhan submitted its application for the same. Sen had to pay Rs 3800 to air India for carrying an excess baggage of 32 kg in the cargo on her flight from Kolkata to Mumbai.

As Ghosh was attending a microfinance event in Hyderabad, organized by the lobbying group Microfinance Institutions network (MFIN), Sen carried the application to Mumbai the previous day, 30 June, which happened to be her birthday. Two sets of applications were to be submitted seeking licence to commence banking business in terms of Section 22 of the Banking Companies act 1949.

Each application had 336 pages, but the annexures ran into thousands of pages as they contained, among other things, Bandhan Financial Services Pvt. Ltd’s memorandum and articles of association, financial statements, credit facilities from banks, annual reports, loan portfolio, ratings, audit reports, various studies undertaken to assess the impact of microloans on borrowers, and everything else to illustrate the group’s ten-year track record.

Sen had to seek the help of others at Kolkata airport to put the big box in the scanner, and finally to take it to the baggage counter. There was curiosity about what it contained. After landing in Mumbai, Sen’s biggest challenge was fetching the big box from the conveyor belt and putting it on the trolley.

From the airport, she headed to Ramee Guestline hotel on Kohinoor Road, opposite Swami Narayan Temple, at Dadar East. By that time, Ghosh had already checked in.

The following morning, Monish Shah, partner of Deloitte Touche Tohmatsu India Pvt. Ltd, joined them. On their way to the RBI headquarters at Fort, they went to the Siddhivinayak Temple at Prabhadevi, to offer prayers.

As they reached RBI a bit early, the trio spent a few tense minutes over coffee at the Starbucks outlet in Horniman Circle. At around 10 a.m., Shah and Sen carried the box lying at the lobby of the RBI building to the lift. The destination was the thirteenth floor, the office of Sudha Damodar, chief general manager, department of banking operations and development (DBOD).

They had to wait as another applicant was already with Damodar. After a little while, the trio was ushered into a conference room even as two gentlemen were getting out of it, carrying a suitcase each after emptying their applications inside. N. Sara Rajendrakumar, general manager, was with Damodar.

As the Bandhan team kept the box on the table at the conference room, they were offered pouches of apple juice. Ghosh introduced himself, and Sen and Shah, to the central bankers. Sen opened the box and took out the application, a spiral-bound book and a CD.

There was a brief interview. Damodar’s questions were on why Bandhan wanted to become a bank, Ghosh’s vision for it, whether it would face any problems in terms of meeting the RBI norms of priority loans and other reserve requirements, the number of employees on its roll and its business model as a bank.

While they were leaving the RBI premises, they saw a long queue outside the gate where IDFC managing director and vice chairman, Rajiv Lall, and senior executives of L&T Finance Ltd, Janalakshmi Financial Services Ltd, among others, were waiting with a bagful of applications.

The Bandhan office had moved into the DN 32 building in 2010. Since then, all floors of the ten-storeyed building were occupied, except for the third floor. It was Ghosh’s dream that one day, the third floor would be used when Bandhan finally got its banking licence.

Once his dream came true on 2 April 2014, new departments were formed and workstations allocated on the third floor. Ghosh himself supervised the seating arrangements. Company secretary, Banerjee, and deputy general manager, finance and accounts, Abhijit Ghosh, sat side by side, as they needed to oversee legal and regulatory work. In the same cubicle, business development head, Giri, and Sen were offered seats. These four were running the PMO.

The PMO created different functional units on the third floor to oversee HR, branch premises, products and process, and IT. The Deloitte executives were also on the same floor. Almost every evening, Ghosh would drop in there and discuss strategies and processes until it was late, till the office boys came with packets of puffed rice and potato fritters.

The first query from RBI came on 5 September 2013. The central bank asked many questions, related to operational issues. a fortnight later, Banerjee got a call from Ghosh, asking him to come to the boardroom. By the time Banerjee reached, Bandhan’s senior executives had already assembled there, and the RBI queries were on the screen.

They were asked to give their views on the issues raised by the regulator. This was the first of many letters that RBI would send to Bandhan, asking questions and seeking information. Each time, Deloitte drafted the reply with inputs from the senior executives after extensive brainstorming sessions. On occasion, it took weeks to answer as one needed to dig into old records.

RBI also wanted a firm commitment from Bandhan that the public shareholding in the company would be brought up to at least 51 per cent, a necessary precondition for the licence.

In early 2014, RBI inspected Bandhan to check its preparedness, not officially though. It was a routine inspection which the regulator had been doing for the NBFC, but this time all questions were related to the banking licence.

A fortnight before the announcement, on 2 April 2015, a couple of senior RBI officials visited the Bandhan headquarters and grilled the senior management on several issues including capital, products, process, governance, IT and risk. The RBI officials also went to the field to do a recce on Bandhan’s preparedness.

Around that time, there was intense speculation in the media on the prospective new banks. Bandhan did not figure anywhere.

Tamal Bandyopadhyay is the author of two best-sellers --  "A Bank for the Buck" and "Sahara: The Untold Story". He writes a popular weekly column on finance, Banker's Trust, every Monday at Mint where he is a Consulting Editor. You can buy his new book "Bandhan: The Making of a Bank" here.

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