The Telegraph
Wednesday , November 20 , 2013
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New bank salutes girl power

Mumbai, Nov. 19: India today got its first “all-women” bank — a savings and lending institution that will be run by women and which will predominantly cater to women.

But it won’t slam its doors on men.

The bank — which will be governed by a board of directors comprising eight women — is arguably the first of its kind in the world.

Many banks in the Gulf and in the West have experimented with women-only branches. Bank Melli in Iran opened a women-only branch with great fanfare at Mashhad in June 2010. Dubai Islamic Bank opened a similar branch in 2001. And in 1964, the National Commercial Bank opened a women’s branch in Scotland where “you would need more than a ravishing smile to win an overdraft”.

But it would be hard to find an entire bank with multiple branches that’s run by women alone.

Headquartered in Delhi, the Bharatiya Mahila Bank (BMB) will have a capital base of Rs 1,000 crore, which is a lot bigger than the State Bank of India’s Rs 684 crore.

The inauguration of the bank on Tuesday meant that the government was able to rush through the process and come good on a promise that finance minister P. Chidambaram had articulated in his budget on February 28.

The objective of the bank is to increase women’s access to banking services. At present, only 26 per cent of women in India admit to having a bank account, Chidambaram said.

The bank will design and offer special products for women and create more job opportunities for them by largely financing projects that are women-oriented.

Coinciding with the 96th birthday of late Indira Gandhi, Prime Minister Manmohan Singh inaugurated the first of its seven branches at a function here today in the presence of UPA chairperson Sonia Gandhi, coalition leaders Sharad Pawar and Farooq Abdullah, and Chidambaram.

Although the BMB now has nine branches on the ground, seven will be operational initially. The branches at Delhi and Indore cannot open now because the Election Commission’s code of conduct is currently in force in these poll-bound states.

The BMB will have 25 branches by the end of this financial year.

The bank looks well capitalised since only four banks — the Central Bank of India, Uco Bank, Vijaya Bank and the United Bank of India — have a larger capital base, based on equity and preference shares. However, most Indian banks have sufficient tier II capital money that banks raise through hybrid instruments and subordinated debt — to buttress their capital requirements. It wasn’t immediately clear how big BMB’s tier II capital would be.

The seven cities where the BMB will start operations are Mumbai, Chennai, Calcutta, Guwahati, Bangalore, Ahmedabad, and Lucknow.

The plan is to initially open branches in state capitals and then expand to tier II towns and rural areas. There is also a 2020 plan in place that envisages the creation of 770 branches by that year. During that year, the bank expects to do a business (deposits plus advances) of Rs 60,000 crore.

In a bid to attract retail depositors, the BMB is now offering higher interest rate on savings bank deposits than its other PSU peers. For savings bank depsoits up to Rs 1 lakh, the bank will offer an interest rate of 4.5 per cent. The interest rate will go up to 5 per cent for deposits of over Rs 1 lakh. All the nationalised banks now offer an interest rate of 4 per cent on their saving bank deposits.

Although the bank will predominantly cater to women, there will be no bar on men opening accounts or obtaining loans. But there is a rider for loans: the project must either be women-oriented or employ more women.

Speaking at the inaugural function, Chidambaram said women had not been availing themselves of banking services even though four nationalised banks and several other private sector lenders had women as their head.

“Since fewer women than men have bank accounts, fewer women are able to get loans. Per capita credit in the case of women is 80 per cent lower than in the case of men. Hence, the need for a bank that predominantly serves women,” he said. The bank will open branches overseas at a later stage.

Later, he told reporters that BMB would be an universal bank that will offer every service provided by other commercial banks. He said the bank will now be 100 per cent owned by the Centre but it could look at listing on the bourses at a later stage.

Chidambaram said the government had asked the Reserve Bank of India to relax its branch expansion rules for one year to help BMB establish its presence. Under RBI regulations, commercial banks must open at least 25 per cent of their branches in rural areas, before opening one in an metro.