Bandhan plans to diversify loan book over next 5 years; microcredit to fall as percent of overall book

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26 Aug, 2025 12:21

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Bandhan Bank will diversify its loan book over the next five years as part of a broader business strategy, Chandrashekhar Ghosh, chief executive officer of the Kolkata-based lender, told Moneycontrol

As per the plan, loans to emerging entrepreneurs (microcredit) will account for 30 percent from around 61 percent currently.  Also, housing finance loans and commercial banking loans will each account for another 30 percent while retail loans will make up 10 percent of the book compared with just 1 percent now, Ghosh said.

“The diversification process of the loan book will happen over the next five years,” said Ghosh. This move is significant since Bandhan has been, traditionally, a lender that had a stronghold in micro credit.

The private-sector lender had initially started out as a microfinance company.

No recast requests so far

Ghosh said there are no requests for restructuring from borrowers till now and the bank does not expect a big number of such requests as borrowers are regaining control of their cash flows in line with the gradual opening up of the economy.

“Collection rates have gone up to almost 91 percent in October. From my interactions with clients, including the SME clients, I understand there won’t be a big number,” he said.

The Reserve Bank of India (RBI) has announced a one-time Covid resolution framework for borrowers impacted by the pandemic. Under this, banks can extend repayment period for borrowers by up to two years and offer other relaxations permissible under the norms.

Explaining further, Ghosh said the improvement in collection rates is encouraging and the economic momentum seems to be picking up in rural India. The bank has 61 percent of its loans under microcredit, and Ghosh said microcredit borrowers are typically well disciplined in making repayments.

Asset quality

The bank reported lower gross non-performing assets (NPAs) in the second quarter at 1.2 percent of the book and net NPAs of 0.4 percent as against 1.8 percent and 0.6 percent respectively. If one accounts for loans that are not tagged as NPAs on account of the interim order from the Supreme Court, the gross NPAs stand at 1.5 percent, still lower on a year-on-year basis.

Ghosh said the bank has been making aggressive provisions to cover any likely shock from the Covid impact.

Net Profit falls

The bank reported a 5 percent fall in quarterly net profit at Rs 920 crore, compared with Rs 972 crore in the year-ago period. One of the reasons for this is the high provisions made during the quarter. The bank made a further provision of Rs 300 crore on standard advances against the potential impact of Covid-19, taking the aggregate additional provision held by the bank to Rs 2,100 crore.

Have enough capital, fully complied with RBI on promoter stake

Ghosh said the bank is comfortable in terms of capital adequacy and isn’t looking for capital at this stage.

In August, Bandhan Financial Holdings, the holding company of Bandhan Bank, had brought down its stake in the lender to 40 percent from around 61 percent through a block trade. The holding company sold the stake worth around Rs 10,500 crore in the bank. Under RBI norms, Bandhan's promoter had to bring down the stake to 40 percent in the first stage. Bandhan Financial Holdings had a 60.95 percent stake in the bank before the transaction.

Ghosh said the RBI has withdrawn all restrictions on the bank that were imposed earlier due to non-compliance on the promoter stake issue. In September 2018, the central bank had imposed punitive actions on Bandhan Bank. These included withdrawing permission to open branches and freezing the remuneration of the Managing Director and CEO of the bank at the existing level until further notice.

However, the RBI later allowed the bank to open branches without its approval but with a rider that at least a quarter of the branches should be opened in unbanked rural areas in a year. As of now, there are no restrictions on the bank on this matter. This relaxation was given after RBI noted that it was impressed by the bank’s efforts to comply with licensing rules.