In a world where people are rushing after getting a Harvard degree to become a CEO and peculate crores of money through initial public offering or IPOs; it takes a Samaritan like Ramesh Ramanathan to leave a plush job of head of derivatives in Citibank in Europe and come back to India to help urban poor in providing financial assistance in a structured manner. The forgotten promise by the banking companies of assisting every sector of society is now rekindled by Janalaxmi bank or Jana bank.
Janalaxmi bank has covered a long journey to earn the title of India’s largest microfinance bank, equity of Rs1636cr and a robust liquidity position. The trail was however full of impediments which the bank bravely overcame eventually. The bank was an NBFC which started as Jana finance back in 2008. When RBI announced the names of 10 banks to which it would provide principal license; Janalaxmi was the last bank to get the license to begin operations. The reason behind this was multiple challenges the company had to face before it could see the beam of success.
The hurdles and difficulties
The company had to first lay in with all the rules and regulations by RBI to get the license for which it had to infuse Rs 1030 crores of equity to complete the final part of the transition to becoming a small finance bank. The fundraising exercise was announced by the bank and it resumed growth. The bank continued to raise more funds and it injected around Rs 600-700 crore further.
The biggest backlash came on November 8, 2016, when the government announced demonetization which had the worst impact on Janalaxmi bank. The ban of Rs500 and Rs1000 notes bought a significant increase in the delinquencies which rose from 0.49% to a whopping 30.58% in a matter of just 30 days. The portfolio risk also increased to 14.15%. This forced the company to ask RBI for 90 days additional forbearance beyond the stipulated time announced by RBI which was 31st December 2016.
Undeterred by challenges the company continued to work on the setbacks and finally after 14 months of the battle of recovering the sticky loans which were blocked due to demonetization and meeting the capital norms; Janalaxmi finance bank finally got the ‘certificate of commencement’ by RBI on March 28, 2018.
The biggest hurdle was successfully overcome by the bank but there few more challenges the bank had to face for smooth working. The vision of the Janalaxmi bank is to “lead a digitalized bank by serving all the segments and communities across the nation.” The vision of doing digitalized banking had to face some technical glitches like running out of batteries of biometric scanners which would disrupt the data feed, making sure smooth running of biometric scanner which would verify the collection and disbursal through just a thumb impression and having a strong back end banking technology system, organizing important data and locating the potential customers were few of many challenges the bank had to overcome.
The skyrocketing loan book and strong balance sheet show how the challenges were overcome by the bank over the course the time. From just Rs60crore in 2009 to a whopping Rs.450crore in 2018, the company never looked back. The growth of Rs200crores and rapid expansion of branches and facilities is how the bank doing justice to its title of being ‘India’s largest microfinance bank’.
Conclusion
Janalaxmi bank today boasts of having 66 branches in 44 cities across 11 states with a strong customer base of 500,000. This bank aims at providing financial assistance to the urban poor like vegetable sellers, small clinic operators in slums, etc. It provides loans in categories of housing, gold, and microloans. The pension schemes for the poor of the country are a noble and very considerate step by the bank to provide them with a respectful and easy life.
The journey of the Bangalore based microfinance company to India’s one of the most successful NBFC turned private bank was a roller-coaster ride. But these difficulties very never big enough to break the strong vision of the company to help the lower section of society and flourish with them.
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