Private sector lender IDFC Bank on Tuesday bought South India-based lender Grama Vidiyal Microfinance for an undisclosed amount. This is a first-of-its-kind transaction, where a bank has taken over a microfinance institution (MFI) and made it a subsidiary. Grama Vidiyal is the fifth-largest MFI in India and has a customer base of 1.2 million, operating from 319 locations across 65 districts of Tamil
Nadu, Kerala Karnataka, Puducherry, Maharashtra, Gujarat, and Madhya Pradesh. The assets under management were Rs 1,502 crore as on March 31, with a quarterly profit of Rs 15 crore. Some of the branches of the non-banking finance company would be converted into IDFC branches. IDFC Bank managing director and chief executive officer Rajiv Lall said, for the time being, Grama Vidiyal will continue with its own branding. Grama customers will get full access to banking services of IDFC Bank.
IDFC Bank already has 50 branches serving about 40,000 MFI customers. Grama Vidiyal customers would add to it.
Before the acquisition by IDFC Bank, Grama Vidiyal’s investors included Vinod Khosla, co-founder of Sun Microsystems. As a fully-owned subsidiary, the firm will work as a business correspondent exclusively for IDFC Bank, said Lall. The acquisition gives the bank access to a sizeable number of rural and semi-urban customers and will help in strengthening its retail (non-corporate) loan base.
The Grama Vidiyal senior management would continue to run the show and all the employees of the newly-acquired MFI would continue with the unit, Lall said.
Commenting on the withdrawal of IDFC Bank’s two partners for the proposed payments bank, Lall said, while Telenor re-evaluated its strategic footprint in India, Dilip Shanghvi withdrew after considering the competitive landscape.
“We decided this was not an opportune time for the trio to pursue a payments bank,” Lall said, adding he has not ruled out any future venture, regarding the niche bank.
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