India & Pakistan: Consolidation Versus Disintegration

India & Pakistan: Consolidation Versus Disintegration

Now that nearly two weeks have passed since India carried out surgical strikes over the LoC undetected, and to a convincing depth of 6.5 km, and no nuclear retaliation has been forthcoming- we can safely assume that the Pakistani bluff has been called.

It was ridiculous to oft-threaten nuclear war, not via rabble-rousing fringe elements, but from the level of the defence minister of Pakistan.

Why the Government of India (GoI), has long cowered under this very same comic book bluff, now seems inexplicable.

So much so, that it has stoically endured successive ‘acts of war’ from an allegedly ‘unstable’ neighbour, without any exemplary retaliation, and for decades on end!

 This is now firmly in the past. The LoC, maintained as sacrosanct for so long by India, is now no longer so. Indeed, the LoC has clearly missed its moment in history. It will probably never be converted into an international border now.

Recent events have indeed highlighted that PoK and Gilgit-Baltistan is legally Indian territory. But, there is much more to it. The dissipation of the nuclear threat for the bogey it was, will help India get on with its double-digit growth ambitions. The non-interference of China, at least its unwillingness to escalate matters, is a big dampener for Pakistani belligerence as well.

Meanwhile, the Indian military has signalled Modi’s change in policy. Not only will it strike again as necessary, but it will choose its time and place, moving from different points along the LoC, and the international border.

It will not repeat its tactics. It will retain the element of surprise. But retaliation against future provocations of its choosing is certain.

Predictability, and the political harness that was ‘strategic restraint’, has been discarded.

The ‘self-defence’ process demonstrated, and the principle of it, highlighted by India’s surgical strikes, has received the widespread backing of most of the civilised world.

In future therefore, Pakistan will pay for cross-border terrorism by having it chase the battle right into the heart of its own vulnerable fault-lines. In fact, it may already be too late.

India declared its change in policy on its independence day, 2016. The prime minister made it a part of his speech from the ramparts of Red Fort. That it was well before the Uri attack, shows that what has followed since, is no knee-jerk reaction.

Just days before 15^th August 2016, India began amplifying and drawing global notice to the causes of protest movements in PoK/Gilgit-Baltistan, as well as Balochistan.

Since then, the atrocities of the Pakistani state have been highlighted by  India at the UNGA, supported by vociferous street protests in New York, Washington, London, and other cities of the West.

The protesting diaspora were not only from PoK/Gilgit-Baltistan and Balochistan, but also, ominously for Pakistan, from Sindh and NWFP.

All this discontent is now out in the open, and gaining increasing traction. It has certainly become regular fare in the Indian media.

It is also being raised by India at government policy level, both diplomatically, and at other multi-lateral forums, pointing out the gross human rights abuses and genocide being perpetrated.

There is also, it is now widely accepted, almost invariably, a Pakistani footprint in any terrorist act around the globe, quite apart from India. And the earlier distinctions between good and bad terrorists has suffered  so much attrition, that it is hardly maintained.

The international community is being treated to new streams of video footage from, and hearing the angry voices of, the native and local people in PoK/Gilgit-Baltistan and Balochistan.  These are highlighting rapes, bombings, abductions, shootings. Any development in these areas are devoid of gains for the locals. Shias are being systematically eliminated.

And now, it’s all about the China-Pakistan Economic Corridor (CPEC), looked at with both trepidation and suspicion by much of the world.

The Chinese had already sunk $12 billion of an estimated $50 billion to be invested, when the protests began to get out of hand. They are now seriously worried.  

Pakistan too is digging itself into a crisis. It may not be focussing on it now, but it will have to pay the eventual bill for the CPEC. This, by way of massive additional indebtedness, to Chinese banks and others. Will it lead to sovereign default, given the fragility of its economy, forcing it to grant even more privileges to China?

Sri Lanka also went in for similar massive, over-priced, Chinese-aided projects under its former leadership. This has now rendered its economy virtually bankrupt.

But apart from its developmental costs, the CPEC has massive security exposures,that will persist throughout its development and operational phases. It will remain a prime target for insurgency, because much of it runs through disputed territory. 

It is already struggling to keep its Chinese road/infrastructure-builders safe. This, despite posting two Pakistani security men to every Chinese working on the project.

President Xi Jinping has expressed concern about this on more than one occasion, and not a little because of the geopolitical pressures he is feeling.

 The Balochistan leadership abroad meanwhile, has already sought sanctuary in India, where it intends to form a government in exile.

On the economic and political fronts also, India is reviewing a rack of options, deliberately keeping things ambiguous. It might be reinterpreting the Indus Water Treaty, removing Pakistan’s unilateral MFN status, boycotting SAARC  meetings in Pakistan,  along with most of the other members, working on declaring Pakistan as a terrorist state etc.  Will it also raise Pakistan at BRICS, particularly with China?

It is surprising, in hind-sight, that Pakistan failed to read the tea-leaves.

Ever since the advent of the Modi government, after early overtures of friendship were spurned, the retaliation to Pakistan’s regular violations of the ceasefire on the LoC, have been markedly robust.  

That these ceasefire violations are regular features to provide covering fire for pushing in infiltrators, makes them doubly offensive.

But, of late, the number of Pakistan’s ‘low-cost assets’ killed, has become substantial. The tally announced was 117 cross-border terrorists over the last 8 months. A dozen more have died on the wires since the surgical strikes.

So going forward, Pakistan must take heed of its sharply increasing costs, as well as its grave potentials. It could quite credibly, break-up altogether!

The trouble is, the Pakistan Army and the ISI will lose its raison d’ etre, and its paramountcy, if it changes course. So, it is the Greek tragedy that  must probably play out instead, recent civil society and political murmuring notwithstanding.

India, on its part will contribute to the process via its no-nonsense ‘offensive defence’ policy from now on. It will seal its entire international border with Pakistan, and put in high-tech sensors, satellite surveillance, drones, other detection equipment, lasers, state-of-the-art fire power, on the LoC.  So much for defence.

But it will also support Pakistan’s enemies with money, training, political support, weapons, and equipment. And India will strike at Pakistan’s terrorists, spies, deep assets, fifth-columnists, and soldiers alike, preferably before they can even make their move.

For: Nationalist Online

(1,163 words)

October 11^th, 2016

Gautam Mukherjee

Defence Purchase Offsets:Biggest Boosters Of 'Make in India'

Defence Purchase ‘Offsets’: Biggest Boosters Of  ‘Make In India’

With the signing of the Dassault Aviation and Reliance Aerospace joint venture, the indigenous defence offsets’ industry, has suddenly come of age.

It will, in turn, spawn a private aerospace/naval/land- weaponry manufacturing ecosphere, involving hundreds of quality vendors; in which TATA, Mahindra, L&T, Wipro, Adani, Infosys, TCS, this, and the other Reliance, all expect to feature prominently.  

But this one offsets’ deal alone ramps up the business profile from Euro 100 million, to Euro 4 billion, but now, in the private sector.

It is on the back of the first purchase of 36 Rafale 4.5 generation fighters from France in fly-away condition. The purchase, 10 years in the mulling, was signed with an embedded 50% offsets’ clause.

Dassault has also indicated its willingness to manufacture 100%, in India, if there are more orders. This, over and above India’s option to buy an additional 18, on the same terms.

This first tranche of the offsets’ translates to a pro-rata Euro 600 million programme annually, spread over 7 years.

Dassault-Reliance Aerospace however expects to be part of the Dassault Aviation consortium’s global supply chain, after this first agreement expires.

Partners in the manufacture of Rafale jets, include French companies Safran, Thales, MBDA, and of course, Dassault itself.

 The Reliance Aerospace JV  is setting up an integrated facility in a 289 acre location in Central India, at Nagpur. This facility will be part of Nagpur’s multi-nodal international cargo hub and airport (MIHAN).

The JV, in a walk-before-you-can-run process, will start manufacture within 12 months, of components for aero structures, electronics parts, and engine components.

Part of the reason the earlier UPA era 126 fighter multi-role fighter tender worth over $20 billion had to be scrapped, was because Dassault did not think the government owned  HAL, was up to the task of comprehensive local manufacture of the advanced aircraft.

Rafale was, after all, created to replace all other fighters in the French Air Force. It is also on order from Egypt and Qatar, and under active consideration by at least a dozen other countries.

It is not only a 4.5 generation multi-role fighter, but has many state-of-the-art features. Enhanced use of carbon fibre composites promotes its stealth capacity. It’s fly-by-wire, with superb avionics and speed. It carries the advanced AESA radar.   

The Rafale is comparable to the mighty American F-35.

The missiles it carries, will enable the Indian Air Force to hit targets in both Pakistan and China, without leaving Indian airspace.

The beyond visual range (BVR) Meteor Mach 4 air-to-air missiles, capable, if necessary, of nuclear deterrence, have a range of 150 km. And the Scalp Mach 4 cruise missile, air-to-ground, has a range of 300 Km..

This first integrated JV will also undertake R&D under the Indian government’s indigenously designed developed and manufactured (IDDM) programme. It plans to graduate towards designing of aircraft, improving efficiency, manoeuvrability and range.

The  JV also expects to provide stealth, radar, and thrust vectoring know-how for missiles, to India’s DRDO.

 It has offered to develop a new ‘Kaveri’ engine with 90kN thrust, to succeed the failed 72kN developed locally, for the Tejas.

This deal is the start of an avalanche of defence purchases and manufacturing coming up, with massive ‘Make in India’ opportunities and highly skilled jobs resulting.

There are howitzers, helicopters, field-guns, submarines, high-powered rifles, light but strong helmets, bullet-proof vests, night vision equipment,  armed-drones, surveillance equipment, sensors, stealth frigates/ other ships, aircraft-carriers, ammunition, missiles, missile-shields etc. on the  $150 billion plus shopping list.

Moving fast in the space, Anil Ambani has also acquired the Pipapav Naval Shipyard, in 2015, and just signed on for another JV with Rafael Advanced Defence Systems, of Israel, to manufacture Python, Derby, Spyder and Barak air-to-air missiles.

Other promising ventures include TATA Boeing Aerospace manufacturing Apache AH-64 helicopter fuselages.TATA  Advanced Materials makes composite panels for power and mission equipment cabinets. It makes auxiliary power unit door fairings for the P-81 long-range maritime surveillance/anti-submarine warfare aircraft.

 Another TATA company, manufactures complex floor beams from composites for the latest range of Boeing 787-9, and provides ground support equipment for the C-17 Globemaster.

Elsewhere, Airbus Helicopters intends, with Mahindra Defence to manufacture military helicopters, starting, again, with helicopter parts.

In the public sector, the DRDO/Russian BrahMos JV, and the DRDO-Israel JV for Barak 8 surface-to-air (SAM) missiles, of course, have been  resounding successes.

Private sector joint venturing, starting with componentry, is evidently the designated and viable way forward for this multi-billion dollar business, just beginning to wash up on Indian shores.

 For: ABP Live

(748 words)

October 7^th, 2016

Gautam Mukherjee

RBI Votes For Growth Over Inflation

RBI Votes For Growth Over Inflation

The rigid Inflation target of 4% of the Consumer Price Index (CPI), by 2018, has been thrown over. It has now been pushed to  ‘early 2021’, with a ‘2% tolerance level’ meaning up to 6%.

The new RBI governor and the 6 man monetary policy team, equally made up of RBI officials and independent, distinguished academics, have unanimously dethroned the paramount emphasis on inflation-containment.

Not that it is being ignored. The CPI inflation target of 5% by March 2017, still looks achievable.

Governor Urjit Patel, also announced that the RBI would target domestic real neutral rates in the range of 1.25%-1.5%, instead of 1.5% to 2% earlier.  This suggests further repo rate cuts in the near term.

Some analysts expect a 180 basis points increase in inflation caused by massive consumption spends via enhanced 7^th Pay Commission gains, and Defence OROP sanctioned.

The inflationary projection however, may not prove to be correct, the consumer spending helping instead to revive the economy further, and raise the GDP levels.

The confidence for the rate cut now, has principally come from a distinct easing of food inflation via a good monsoon. And it also takes comfort from continued moderate petroleum import prices.

The Monetary Policy Committee (MPC) has cut both the repo and reverse repo rates by 25 basis points each, in its very first review. The repo rate is now 6.25% and the reverse repo is at 5.75%. The cash reserve ratio (CRR) that the banks must retain at all times, has been left unchanged at 4%.

This signal could well kick-start the private investment cycle. It could also lower housing loan rates, and awaken the languishing residential housing sector.

It is expected it to further boost the economy, growing at a robust 7.6% already.

The forthcoming operationalising of the GST with a base rate at 18%, per  consensus of the empowered committee, is, in turn, thought to be non-inflationary. But, it will raise GDP by 2% p.a., and substantially boost indirect tax collections in future.

So, collectively, the stage is being set for sustained and compound double-digit growth. We could see the economy doubling from the $2.29 trillion at present, just over the next five years.

 The purchase power parity (PPP) numbers, already in the region of $ 8 trillion, and are also set to double to $13-16 trillion over 5 years.

Business, Industry, economists, quickly welcomed RBI’s change of stance. As did the stock markets, peaking higher, hailing the new RBI interest rate, not seen since 2010.

Shorter maturity gilts and bonds also rallied on news of the modest rate cut, and on expectations of more to come.

The public sector banks, beleaguered by high non-performing assets (NPAs), may be reluctant to pass on the interest rate cuts to borrowers.

Governor Patel however, expressed confidence that the accumulated bad loans would not stand in the way of new lending. This, amid reports that the RBI was about to finalise parameters for at least one ‘bad bank’ to purchase, at a discount, some of the bad loans.

But, also, many of the so-called NPAs are not chronically irredeemable. Patel hinted at this by saying that just five sectors of the economy-infrastructure, steel, textiles, power and telecom, collectively accounted for 61% of the stressed assets.

From this listing, we can see some of the problems can be eased by government fiat, and others, due to global pressures, call for sympathetic handling, to carry cyclic industries, over the difficult period.

Patel  pointed to the uncertainties and slower growth in the US and the EU and cited expected volatility in emerging markets (EMs), like India, both as a knock-on, and because of fluctuating macro-data from America and other developed economies.

And while China, the second biggest economy in the world, is expected to only grow in the 6% plus band, the slowing of its vast economic engine, could be difficult to manage domestically, and impact the global economy.

China carries a great deal of the US sovereign debt, for example. Meanwhile, through it all, the Yuan has just joined the international basket of reserve currencies, a long cherished Chinese wish.

 On the plus side, China, with an economy at between $ 12-15 trillion, and trillions of dollars in reserve, does have options to reorient its growth.

While the contrasting styles of Patel, and his predecessor Rajan, are evident, the RBI is still extremely independent. But, this first monetary policy review, indicates that it nevertheless intends to be helpful, rather than adversarial.

For: ABP Live

(747 words)

October 6^th, 2016

Gautam Mukherjee

RBI Emphasises Growth Over Inflation,Eases Monetary Policy

RBI Emphasises Growth Over Inflation, Eases Monetary Policy

The rigid Inflation target to be contained at 4% of the Consumer Price Index (CPI), was, if not for the substantial infrastructure spending of this government, causing the economy to stand-still, or regress over the last 30 months. It was an unprecedented Rajan innovation, and has no absolute sanctity or irrefutable logic to it.

So, it is good news indeed, that this particular can has just been kicked down the road, from 2018, to ‘early 2021’, with a pointed ‘2% tolerance level’. The RBI is suggesting 4-6% inflation is acceptable, even in the longer time-frame.

In one fell swoop, the new RBI governor and the 6 man monetary policy team, equally made up of RBI officials and independent, distinguished academics, have unanimously dethroned the inordinate emphasis on inflation-containment, at the expense of a largely stagnant economy.

Inflation management might have been given top-billing by the previous dispensation at Mint Road.  But, it’s not being thrown over even now. It is just that the CPI inflation target of 5% by March 2017, still looks achievable, in fact, more so, than it did in June, or August, 2016 because of improving circumstances.

RBI governor Urjit Patel, also announced that the country’s central bank would henceforth be targeting domestic real neutral rates in the range of 1.25%-1.5%, down from 1.5% to 2% earlier. 

This lower interest regime suggests further repo rate cuts in the near term. In the face of possible inflation upticks of about 180 basis points, expected by some analysts, over the next few quarters, these clear signals from the RBI suggest it cannot be allowed to stand in the way of growth stimulus, to the economy as a whole.

And the 180 basis points anticipated, will emanate, it is thought, from  expected consumption spends from enhanced 7^th Pay Commission salaries, and Defence OROP sanctioned.

But, if this money is put into the economy, as is natural, it will also stimulate demand for a host of goods and services. The inflationary projection is based on a sudden gush of money, chasing too few goods and services, but it may not necessarily turn out to be the case at all. The consumption led spending may add to the GDP in a sustained manner, instead.

The confidence for the rate cut now, however, has principally come from a distinct easing of food inflation via a good monsoon. As food inflation affects the maximum numbers of poor people, it is of paramount importance.

And it takes comfort from continued moderate petroleum import prices, particularly via long-term contracts entered,  sustaining through to the medium term.

Overall, governor Urjit Patel, and  the monetary policy committee (MPC), has lost no time in declaring for a lower interest regime, albeit with a cautious opening gambit.

They have cut both the repo and reverse repo rates by 25 basis points each, in the MPC’s very first review. The repo rate is now 6.25% and the reverse repo is at 5.75%. The cash reserve ratio (CRR) that the banks must retain at all times, has been left unchanged at 4%.

This signal could well kick-start the private investment cycle, stagnant for the 30 months of the Modi government so far. It could also lower housing loan rates and awaken the languishing residential housing sector.

Predictably therefore, the government and the finance minister, welcomed the MPC policy stance, and expected it to further boost the economy, growing at a robust 7.6% already. This is, both as per the RBI, and the IMF’s estimates, and even 8%, according to Niti Aayog.

The forthcoming operationalising of the GST with a base rate at 18%, per  consensus of the empowered committee to set rates, is, in turn, thought to be non-inflationary by the RBI as well.

But, it does have the potential to raise GDP by 2% p.a., and substantially boost indirect tax collections.

So, collectively, the stage is being set for compound double-digit growth year-on-year, for perhaps two decades going forward.

This, of course, in the absence of full-fledged war, with either, or both, of our less-friendly neighbours.

Left to our own devices, we could see the economy doubling from the $2.29 trillion at present, just over the next five years.

 The purchase power parity (PPP) numbers are already in the region of $ 8 trillion, and therefore could reach $13-16 trillion in the next five years, by the same token - inflation notwithstanding.

Business and Industry, plus the chambers of commerce, quickly welcomed RBI’s change of stance. As did the stock market, peaking higher, absorbing the impact of a new central bank interest rate, not seen since 2010.

Relatively short maturity gilts and bonds also rallied on news of the modest rate cut, and on expectations of more to come.

It remains to be seen how much and how quickly, if at all, the rate cuts are passed on to borrowers.

The public sector banks feel beleaguered by their high declarations of non-performing assets (NPAs), at the urging of the previous governor.

Governor Patel however, expressed confidence that the accumulated bad loans would not stand in the way of new lending. This, amid reports that the RBI was about to finalise parameters for at least one ‘bad bank’ to purchase, at a discount, some of the bad loans.

But, actually many of the so called NPAs are not chronically irredeemable. Patel hinted at administrative and financial support/ restructuring, saying that just five sectors of the economy-infrastructure, steel, textiles, power and telecom, collectively accounted for 61% of the stressed assets.

From this listing, we can see some of the problems can be eased by government fiat, and others, due to global pressures, call for sympathetic handling, to carry cyclic industries, over the difficult period. There is little suggestion of deliberate malfeasance, fraud, or unprofessionalism to blame.

This assessment too, is a departure from harsher judgement of both bank lending norms, the way they were implemented, as well as the debtors, in the past regime.

India will prove to be an oasis of relative calm, Patel seemed to suggest, going forward, pointing to the uncertainties and slower growth in the US and the EU.

Patel cited the impact of volatility in emerging markets (EMs), like India, both as a knock-on, and because of fluctuating macro-data from America and other developed economies.

And while China, the second biggest economy in the world after the US now, is expected to only grow in the 6% plus band, the slowing of its vast  economic engine, will not only be difficult for it to manage domestically, despite  its massive foreign exchange reserves, but also impact the global economy adversely.

China carries a great deal of the US sovereign debt, for example.

Meanwhile, through it all, the Yuan has just joined the international basket of reserve currencies, a long cherished Chinese wish.

China, with an economy at between $ 12-15 trillion today, and trillions of dollars in reserve, has many options to reorient its growth. Away, that is, from an over reliance on exports, and domestic infrastructure building, in future.

Given all these global head-winds, boosting borrowing and lending to stimulate the Indian economy, which is growing faster than any other major economy, is a very desirable objective.

 While the contrasting styles of Patel, and his predecessor Rajan, are evident, the RBI is still extremely independent in its functioning. But, this first monetary policy review, indicates that it nevertheless intends to be helpful, rather than adversarial.

In a financially troubled world, battling low growth and recessionary tendencies, localised conflict, and other polarities, that this is so, is just unadulterated good news.

For: The Sunday Guardian

(1,258 words)

October 5^th, 2016

Gautam Mukherjee

BOOK REVIEW-BANDHAN-THE MAKING OF A BANK BY TAMAL BANDYOPADHYAY

BOOK REVIEW

Title:  BANDHAN-THE MAKING OF A BANK

Author: TAMAL BANDYOPADHYAY

Publisher: PENGUIN RANDOM HOUSE INDIA, 2016

Price: Rs.499/-

 BANDHAN-Micro-Finance & Banking On A Shoe-String

New economic success stories from Bengal over the last three decades are rare. And ones that feature Bengalis running things successfully  are even more scarce. There are a few notable exceptions- Bandhan is one, then there’s Peerless, and the ABP Group.

But Bandhan, a little like Sahara without its recent crash and burn, run by a Bengali, initially out of Gorakhpur in UP, is a success story of a shoe-string operation grown huge.

But Bandhan has done it thus far, without sacrificing its early work ethos, culture, and good name, as a helper of millions of poor entrepreneurs, over more than a decade of its existence.

This book by Tamal Bandyopadhyay, earlier a Bhartia/Birla owned Mint journalist, who later became a Bandhan employee, dwells on the stamp of founder Chandra Shekhar Ghosh, originally from seemingly eternally Communist Tripura.

It also reads as a highly HR driven profile, of the poor people who manned Bandhan, and essentially knew how to help their own kind.

One key employee used to sell eggs for a 20 paise profit on each egg, for example, before joining Bandhan’s team. Ghosh himself could barely feed his family, and his father was a struggling sweet-meats seller in Agartala.

If anything comes closest to the oxymoron called Communist enterprise, then Bandhan micro-credit, grown into Bandhan Bank recently, in August 2015, is a good example.

It sought, from the very start, to displace the 730% p.a. charging, but  no-questions-asked-no-collateral/guarantor money-lenders; who would charge 1% to lend Rs. 500 for half-a-day.

Bandhan’s value proposition was that it offered an infinitely better deal, without taking formal deposits, and it actually took a risk on its customers by choosing them well, but believing in them.

The Sahara Group, by way of contrast, may have retained some of the “Managing Worker” pretensions from its early days in ‘para-banking’, as well as a pater familias air in the top man; but otherwise it grew into something of a corrupt monarchy, with very feudal North-Indian DNA.

Bandhan’s Ghosh however, probably modelled himself, albeit unconsciously, after the great Communist icons, much admired in Bengal, Lenin, Stalin, Mao, even ‘Jyoti Babu’.

By strange coincidence, Ghosh’s family originally came from Sonargaon, in Dhaka, the Bangladeshi ancestral home of Bengal’s longest-serving chief minister Jyoti Basu.

The ideologically Communist way of doing things - simply, at minimum cost, and with statist-style tight control, worked well for Bandhan, particularly in the grindingly poor semi-urban villages of Bengal, not far from Kolkata.

But, Bandhan microfinance really got its inspiration from the Bangladeshi pioneers, including the Grameen Bank, ASA, BRAC, and others.

 ASA, from Bangladesh, provided early ‘technical support’ to Bandhan micro-finance.

Dhaka was also where Ghosh had studied and graduated from. He had first gone to work with BRAC (Bangladesh Rehabilitation Assistance Committee), and this gave him a very good grounding on how to assist the very poor.

ASA wanted, as Bandhan grew, to take over 75% of its equity, in 2007. When this failed, ASA started out as a competitor instead, poaching many key Bandhan employees.  

However, it is Bandhan which grew out to become the world’s largest micro-finance company. This, even as the concept took root in Africa, Sharia ruled Western Asia, and South America as well.

Essentially there was, and is, a great opportunity both for micro-credit and formal small-retail banking in the East and North East. It was there waiting to be tapped, throughout the life of Bandhan microfinance, and now Bandhan Bank.

According to RBI data cited by Bandyopadhyay: ‘as on 31 march 2015, the east accounts for 16 per cent and the north-east only 2.6 per cent’, of ‘126,000 bank branches’.

In Bengal however, recent scandals concerning both unscrupulous NBFCs and Chit Funds, tell us how the vacuum, between regulatory walls and being under-banked, was filled; but not, clearly, to the benefit of the numerous poor, easily duped depositors!   

Though Bandhan is now a ‘universal bank’, it will continue with its USP of giving ‘small loans’, but now, by encouraging ‘ deposits from small savers’. This is something it could not do legally, as micro-creditors are not allowed to take formal deposits.

Bandhan used to form ‘groups’ of people paying Rs. 5 a day for 40  days, and when this Rs. 200 was received, it would advance a loan of Rs. 1,000/-. 

It soon clocked up 195 borrowers out of two branches. Later, it got an early loan from SIDBI to enlarge its operations, and open at more locations.

In 2002, its first year of operation as a not-for-profit NGO, Bandhan had 2 branches in Bengal, 512 borrowers, and had disbursed loans worth Rs. 3,50,000.

Later, in 2006, as its growth engine beat their own projections, Bandhan converted itself into a ‘for-profit’ NBFC, and spread its wings to other states in the country.

In 2015, when Bandhan Bank was launched, it had 2,022 branches, 6.7 million borrowers, and a ‘loan book of Rs. 10,500 crores.’

The universal banking avatar however, started with 501 branches, a record in the banking industry globally, writes Bandyopadhyay.  And it was a high -technology driven, IT woven collective.

Tamal Bandyopadhyay ends the book with a review of some other players in the micro-finance space who mostly lost their way after a promising mid-heaven. It only serves to underline the enduring nature of the Bandhan success.

Of course, Chandra Shekhar Ghosh no longer scours the countryside on a motorcycle to spot possible branch locations and customer clusters. He now occupies a corner office in a large corporate HQ.  He also graduated to a Toyota Fortuner, some time ago. But now, Ghosh is driven around in a spanking new Land Rover Discovery.

For: The Sunday Pioneer, AGENDA, BOOKS

(939 words)

October 3^rd, 2016

Gautam Mukherjee