IndusInd Bank, Bandhan among major lenders in MUDRA Yojana

For FY22, the total loan amount disbursed, which includes loans by PSBs, private sector banks, NBFCs, MFIs, small finance banks (SFBs), NBFC-micro institutions, regional rural banks (RRBs) and state co-operative banks was Rs 3.31 lakh crore.

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Of this, IndusInd Bank’s total loan disbursement amount under the scheme totalled Rs 41,944 crore, the highest among all banks. This was followed by Bandhan Bank at Rs 41,338 crore.

SBI recorded total loan disbursement of Rs 28,352 crore, while Punjab National Bank (PNB) disbursed Rs 13,241 crore. Another public sector lender, Canara Bank, reported Rs 13,418 crore of total disbursed loans.
In fact, not just only for FY22, but for the past few years, the two lenders accounted for a lion’s share of the MUDRA Yojana disbursements.

The MUDRA data for FY21 showed IndusInd Bank’s lending amount at Rs 32,334 crore and Bandhan Bank’s at Rs 32,558 crore, out of the total Rs 3.11 lakh crore.

In the previous year (FY20), IndusInd Bank and Bandhan Bank lent Rs 38,199 crore and Rs 14,755 crore respectively, out of the total Rs 3.29 lakh crore.

Experts attribute this to the lenders’ rising microfinance portfolio and acquisition of microfinance companies over the years.

“IndusInd Bank and Bandhan Bank have a large microfinance portfolio. IndusInd acquired Bharat Finance and Bandhan acquired Gruh Finance as the lenders were working to boost their microfinance portfolios,” said Ashvin Parikh, Managing Director (MD) and Chief Executive Officer (CEO), Ashvin Parekh Advisory Services LLP.

Among the different categories, Shishu is the smallest of the three with a loan size of Rs 50,000. The next is Kishore for loans between Rs 50,000 and Rs 5 lakh, and the last is Rs Tarun for loans between Rs 5 lakh and Rs 10 lakh.

Microfinance portfolio and acquisition

IndusInd Bank’s microfinance portfolio in the last three years, totalling between 9 percent to 13 percent of the total loan book, has been rising.

In FY20, the lender recorded a total microfinance portfolio of Rs 82,118 crore. The next year, the figure climbed to Rs 95,240 crore, and in FY22, the bank had Rs 1.12 lakh crore in its microfinance portfolio.

On the other hand, Bandhan Bank’s microfinance portfolio has witnessed mixed growth in the last three years. In FY20, the bank’s microfinance portfolio stood at Rs 60,081 crore, which dropped to Rs 56,760 crore in FY21, but climbed to Rs 62,180 crore in FY22.

Also, both private sector lenders, in the past few years, have acquired MFIs to further enhance their microfinance portfolio.

IndusInd Bank acquired Bharat Financial Inclusion in October 2017. Bharat Financial Inclusion which was previously known as SKS Microfinance, was the country’s largest microfinance company.

NBFC-turned lender Bandhan Bank acquired Gruh Finance in October 2019, primarily to expand its housing finance portfolio.

Experts said that IndusInd Bank’s microfinance portfolio growth is happening majorly due to the bank’s lending capacity and the comfort level in the segment.

“Due to the size of the bank, IndusInd cannot afford to lend to big corporations. Instead, it worked on a strategy to lend to small and midsize companies. With this, the bank went towards diversifying its lending portfolio, and hence, ventured into microfinance where it found stability,” Parekh explained.

Whereas, for Bandhan Bank, experts highlighted that the lender, which started as a non-governmental organisation (NGO) and later turned into an NBFC and bank understands the depth of the microfinance segment.

“Bandhan geographically is strong in areas where microfinance has a huge demand. Also, the lender has a history of starting-off as an NGO and later converting into an NBFC. This gives the bank a clearer understanding of the sector,” a bank analyst said.

Further, Bandhan, during its NBFC days, was more focused on unsecured lending. This changed when it became a bank, and hence, it focused more on secured lending.

Jinay Gala, Associate Director, India Ratings and Research, explained: “After Bandhan became a bank, it worked on its strategy to focus on secured deposits as the regulatory demands are strict. And with the acquisition of Gruh Finance, the lender's microfinance portfolio grew.”