Bandhan Bank to shift focus from large corporate loans to microfinance

At present, microfinance is 86% of Bandhan Bank's book

Bandhan Bank has said it will stay away from large corporate loans and remain focused on microloans in the short term. This comes after the bank took a hit on its books on account of loans given to Infrastructure Leasing and Financial Services (IL&FS).

At the bank’s fifth annual general meeting (AGM) in Kolkata, C S Ghosh, managing director and chief executive, said Bandhan Bank has identified four pillars of growth — to dominate and defend the core microfinance business, explore and expand affordable housing segment, explore and expand into adjacent domains of retail and micro enterprise, and garner low-cost funds from core and adjacent segments.

At present, microfinance is 86 per cent of Bandhan Bank’s book.

Responding to shareholders’ queries on the rise in non-performing assets (NPAs), Ghosh said that the increase was on account of loan to an infrastructure company, referring to the bank’s exposure to IL&FS. The bank had already made a provision of Rs 385 crore last year on that account.

The gross NPAs of the bank at the end of the fourth quarter (Q4) of the financial year 2018-19 (FY19) stood at 2.04 per cent, against 1.25 per cent in the same quarter a year ago.

Later, on the sidelines of the AGM, Ghosh said the bank would like to grow cautiously in the near term and stay away from big corporate loans.

“Drastic growth will not be sustainable. We would like to grow carefully,” said Ghosh.

In January, Bandhan Bank announced its merger with Gruh Finance, which reduced the promoters’ stake to 61 per cent, from 82.3 per cent earlier.

In September 2018, the central bank stopped any increase in Ghosh’s salary and also withdrew the bank’s right to open new branch on its own.

The bank is required to seek permission from the RBI to open any new branch. This was a penalty for not reducing its stake till the deadline of August 23, 2018.

The RBI says promoter stake in the new private banks should not exceed 40 per cent.

Bandhan Bank has reported a 67.7 per cent jump in Q4FY19 net profit at Rs 651 crore, against Rs 388 crore in the same period last year.