MICROCAPITAL BRIEF: IDFC Bank Acquires India’s Grama Vidiyal Micro Finance

The Infrastructure Development Finance Company (IDFC) Bank, an Indian for-profit private company providing banking and other financial services, recently acquired Grama Vidiyal Micro Finance, a microfinance institution (MFI) headquartered in the Indian state of Tamil Nadu, increasing its rural and semi-urban customer base by 1.2 million. The companies did not disclose the value of the deal although sources “estimated the transaction at INR 3 billion” (USD 45 million) [3]. While the assets of Grama Vidiyal will be transferred to the books of IDFC Bank, it will remain a wholly-owned subsidiary of IDFC Bank and act as a business correspondent for it.

The acquisition will increase the bank’s network and reach giving IDFC Bank additional customers in 65 districts in seven states of India. These customers will gain access to the full range of IDFC Bank’s credit products, digital services and door step banking services. In particular, the bank plans to expand its micro automated teller machine (ATM) service to its new customers, expanding banking services in retail stores and at customers’ homes [1].

As of July 2016, Grama Vidiyal reported an asset base of USD 228 million and 319 branches. The MFI focuses on offering credit services to women from rural backgrounds.

IDFC Bank, a subsidiary of IDFC Limited, started its banking operations in October 2015 after receiving in-principle approval from Reserve Bank of India (RBI). While 95 percent of the loan portfolio of the bank comprises issues to large firms, the bank is trying to expand its presence in rural and semi-urban areas, operating under the name of Bharat Banking [2].

By Sharanya Madhavan, Research Associate

About IDFC Bank

The Infrastructure Development Finance Company (IDFC), based in Mumbai, is a financial services provider that was established in 1997 and finances infrastructure projects in India. The IDFC Bank, part of IDFC, started its operations in October 2015, with the launch of 23 branches across India. As of March 2016, it reported total assets worth INR 739 billion (USD 11 billion), a loan portfolio of INR 456 billion (USD 7 billion) and return on assets (ROA) of 0.83 percent.

About Grama Vidiyal

Grama Vidiyal is a microfinance institution based in Tiruchi, in the Indian state of Tamil Nadu. Since 1993, Grama Vidiyal, in partnership with Indian Nonprofit Activists for Social Alternatives (ASA), has provided loans to women without access to formal credit and who typically have daily incomes of less than INR 80 (USD 2) per day. As of July 2016, Grama Vidiyal reported an asset base of USD 228 million, 1.2 million customers and 319 branches. Grama Vidiyal was acquired by IDFC Bank in July 2016.

Sources and Additional Resources

[1] IDFC Bank press release: IDFC Bank to expand reach with acquisition

[2] Live Mint: IDFC Bank buys Tamil Nadu-based Grama Vidiyal

[3] Economic Times: IDFC Bank announces acquisition of Grama Vidiyal Microfinance

MicroCapital Universe Profile: Grama Vidiyal

MicroCapital Universe Profile: IDFC Bank