Customer trusts the physical bank branch, says Bandhan Bank MD & CEO

Chandra Shekhar Ghosh, managing director and chief executive officer of Bandhan Bank, outlines the road map for diversifying the loan portfolio away from micro loans in an interview with Manojit Saha. Edited excerpts:

Asset quality of the bank has improved substantially in the fourth quarter. Collection efficiencies are over 95 per cent for March. Does that give you confidence that the worst is over and the current financial year will be a normal year?

When I go to the ground level, I see customers have started their business. When they are running the business, automatically their repayment is coming back. As a result, non-performing assets are coming down and credit demand is increasing. Disbursement in the fourth quarter was 15 per cent higher than the pre-pandemic quarter. This has given the confidence that the customer demand is coming back.

Has the situation in Assam also improved in terms of collection?

It is now aligned with the national collection efficiency. Assam’s collection efficiency is 98 per cent, while that of national is 99 per cent.

NIM for Q4 was 8.7 per cent — highest in 11 quarters. With the interest rate cycle moving upward, can you sustain those margins?

The reason behind the margin improvement is the recovery of NPAs. The second reason is operating profit growth of 53 per cent. Our NIM generally lies between 7.5 per cent and 8.5 per cent. I would say we can sustain NIM around 8 per cent.

Micro loans are still 50 per cent of the loan book. What is the road map to diversify the loan book?

When we started the bank seven years back, 98 per cent of the loan book was micro and group loans; now it is 47 per cent. Our plan is, by 2025, micro loans will come down to 26 per cent. We have 13 million borrowers in micro credit. On an average, 50 per cent of the borrowers are with us for 10 years and have graduated to entrepreneurs and their requirement for credit is as the MSMEs. Twenty-five per cent of my group loan customers have graduated to such a credit profile in the last two years. That has helped us diversify and the quality of that portfolio is also better.

Bandhan has seen healthy loan growth in Q4? What kind of loan growth do you see for FY23?

We have 14 per cent loan growth on a year-on-year basis. If you see sequentially, the growth is 13 per cent. Loan growth in the current financial year will be more than the previous one.

You have opened more than 300 branches in FY22. Will you continue with such aggressive expansion of branches?

This year, we have a plan to open 530 branches. Majority of these will be outside the eastern part of the country. We want to increase penetration in the south, west and north.

What is the reason for opening branches so aggressively when most banks are going digital?

We have learnt in the past seven years that the customer trusts physical branches. We would like to gradually transform them from physical to digital. They may have mobile phones but they may not have the same comfort. So we need physical branches, to reach out to more people and educate them with digital transactions.