CDC invests $28m in India's Ratnakar Bank

This is CDC's first direct equity commitment in an Indian bank since it revised its strategy to focus on debt and direct investments in South Asia and Africa in addition to acting as a fund-of-funds LP. In February, the UK development finance institution contributed $27.5 million to the latest round of funding for Indian e-commerce platform Jabong.

Ratnakar will use the fresh capital to support its expansion plans. The bank was founded in 1943 and traditionally concentrated on Maharashtra, Karnataka and Goa. A new management team - led by former Bank of America executive Vishwavir Ahuja - arrived in 2010 and the lender altered its strategy to focus on lending to small and medium-sized enterprises (SMEs) across a wider geographic area.

The bank received its first round of funding from Faering Capital, Gaja Capital Partners and Norwest Venture Partners later the same year. In early 2013, International Finance Corporation (IFC) said it planned to invest INR1.3 billion ($24 million). Other backers are said to include Beacon India Private Equity, Cartica Capital, HDFC and Samara Capital.

Ratnakar has received more than INR15 billion in funding over the last three years, taking its tier one capital to INR20 billion.

The bank has a total business size of more than $2.4 billion and serves around 500,000 customers through a network of 160 branches and 350 ATMs across 12 states. It is looking to grow its presence in Rajasthan, Madhya Pradesh and West Bengal, where the penetration of financial services is low.

The goal is to increase the client base among financially excluded groups to 1.3 million accounts. The expansion that comes as part of this is expected to triple Ratnakar's current 2,500-strong workforce by 2018. Last year, the bank bought part of RBS' India business.

The Indian banking sector is growing at a rate of 14-16% per year, but the World Bank estimates that 65% of the country's 1.2 billion people still do not have access to formal financial services.

We view this is as a unique opportunity to invest in an institution which has a real prospect of becoming a platform serving a population that CDC wants to reach and fostering financial inclusion, financing of SMEs and agribusiness," said Srini Nagarajan, CDC's regional director for South Asia, in a statement.

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• Topics
• South Asia
• Financials
• Expansion
• India
• CDC Group
• Growth capital
• Financial Services