IFC to invest $24m in India’s Ratnakar Bank
International Finance Corporation (IFC), the investment arm of the World Bank, plans to invest up to INR1.3 billion ($24 million) in India’s Ratnakar Bank. The commitment, which would be structured as a preferential allotment, complies with IFC’s strategy of supporting financial inclusion and facilitating lending to micro, small and medium enterprises (MSMEs).
Ratnakar Bank is already in the process of raising INR3.25-3.3 billion (around US$60 million) from 5-6 investors. Professional and institutional players currently own about 60% of the bank, with the remainder in the hands of retail investors.
The institutional backers are said to include Beacon India Private Equity, Cartica Capital, Faering Capital, Gaja Capital Partners, HDFC, Norwest Venture Partners and Samara Capital.
The Kolhapur-based lender sourced its first round of funding in 2010 from Faering, Gaja and Norwest, shortly after former Bank of America executive Vishwavir Ahuja took over as CEO and managing director. Last month it was reported that a consortium of private equity investors had agreed to provide INR3 billion in order to back the bank ahead of an IPO scheduled for 2013.
Ratnakar Bank was established in 1943 with the core objective of serving MSMEs. It has 177 branches and 158 ATMs across Maharashtra, Karnataka and Goa, as well as maintaining a presence in Delhi and Gujarat. Most of the 400,000 customers are residents of semi-urban and rural areas, with a strong focus on the trading, agriculture and manufacturing sectors.
According to the IFC proposal, Ratnakar Bank's loans to the MSMEs amounted to INR400 million during the 2012 financial year. The goal is to increase this figure to INR4.5 billion by 2016. It also wants to expand the number of female borrowers more than 40-fold to 450,000 over the same period.
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