Bandhan Bank to Reduce Share of Group Microfinance Loans to 50% by March

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Bandhan Bank is on track to reduce the share of group microfinance loans in its portfolio to 50 percent by March. This decision is part of the lender’s strategy to diversify its asset mix as well as to develop the activity of emerging entrepreneurs (EEB).

At the end of the second quarter of the fiscal year, the bank’s EEB asset book stood at Rs 54,040 crore of which the group loan was Rs 46,270 crore. This represents 56.7% of the bank’s loan portfolio. The share of group loans has been declining continuously in recent quarters (see graph).

The bank has internally set an exposure limit of around Rs 1.5 lakh for borrowers in the group. However, this may not be enough for some of the borrowers with higher demand and better repayment capabilities.

“A few years ago, we did a survey and found that it was difficult to finance those who are able to run a good business, as part of the group,” said Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank.

“The process has slowed down because of the pandemic and has resumed now. We are looking for good group borrowers for individual financing. I expect the share of group loans to drop to 50% by March, ”he added.

The bank has set a target of having an asset mix of 30 percent EEB loans, 30 percent housing, 30 percent shops and 10 percent retail by 2025. As of 30 September 2021, the EEB accounted for 66 percent of housing 24 percent, commercial 8 percent and retail at around 1 percent of total advances of Rs 81,661 crore.

Recovery plan

Ghosh said an encouraging trend for the bank during the quarter was that the proportion of non-paying microfinance borrowers fell from 9% as of June 30, 2021 to 4% as of September 30, 2021.

The number of partial paying customers has also been reduced from 29% as of June 30, 2021 to 17% as of September 30, 2021.

“Customer requests started coming in with the reimbursement. Group attendance has started to improve. It is a good sign that the risk is decreasing in the future, ”he said.

The bank’s non-performing assets soared to 10.8 percent in the second quarter of the fiscal year, from 8.2 percent in the first quarter and 1.2 percent in the corresponding second quarter of the previous year.

The bank has identified an overall EEB stress pool of Rs 19,500 crore and estimates that it is expected to recover around Rs 6,000 crore by March 31, 2022. This will be further supported by the CGFMU (Credit Guarantee for micro units), the Assam relief program and the bank’s program. own provision of Rs 9,500 crore.

“Confidence in the recovery comes from the collections we saw in the quarter and what we see in October. Our arrears collection efficiency including has been 130 percent and if this rate continues for the next 3 months I don’t think we will have a challenge to collect Rs 6,000 crore ”said Sunil Samdani, CFO , Bandhan Bank, on the call for quarterly results.

The bank recovered nearly Rs 1,100 crore from the stress pool in September, and Samdani said the recovery trajectory was improving.


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