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SIDBI picks up 11% more in Bandhan

Small Industries Development Bank of India (SIDBI) on Wednesday raised its stake in the country's leading microfinance institution, Bandhan, to 12.23% from the existing 1.31%, underscoring the growing role of such institutions that lend to the poor.

The additional 10.92% stake will cost SIDBI Rs 50 crore. Accordingly, the paid-up capital of Bandhan-which lends only to women-will rise to Rs 118 crore from Rs 68 crore, and its net worth to Rs 165 crore (Rs 115 crore).

At present, SIDBI is the lone institutional stakeholder in Bandhan. Both Bandhan and SIDBI confirmed the development to ET.

“This is a significant development for us. Not only does our capital adequacy ratio improve to 17.83% from 13.23% earlier, fresh equity will help our business grow,” Bandhan managing director Chandra Shekhar Ghosh said.

Bandhan's principal shareholder is Financial Inclusion Trust (FIT), a trustee created by the MFI as the vehicle for CSR activities. With SIDBI enhancing its stake, FIT's holding now stands at 58% while the promoters and associates hold about 2%, and the balance is with employees.

Mr Ghosh said FIT is an independent trust and the dividend it earns from the holding is used for CSR activities, primarily in the health sector.

In just seven years of its existence, Bandhan has created an outstanding asset portfolio of Rs 1,080 crore and it is targeting to take this to Rs 1,200 crore by March 2010. In November 2009 alone, it disbursed Rs 250 crore of loans. In 2009, the MFI added 506 branches, taking the tally to 1008, across 14 states. It will soon open a branch in Arunachal Pradesh.

Bandhan is incorporated as Bandhan Financial Services Pvt Ltd (BFSPL) under the Companies Act, 1956, and also registered as a non-banking financial company with the Reserve Bank of India (RBI).

Source: Economic Times

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