You are here: Home » Finance » News » Banks
Business Standard

ICRA downgrades rating outlook on Bandhan Bank to 'negative'

Stress in small business loans triggers action

ICRA | Bandhan Bank

Abhijit Lele  |  Mumbai 

Bandhan Bank

Rating agency has downgraded the rating outlook on from ‘stable’ to ‘negative’ following the sustained weakness in its emerging entrepreneur business (EEB) portfolio despite the improvement in collections in Q2 FY2022.

It reaffirmed ratings assigned to debentures and term loans from

The gross stress pool in the EEB segment - increased to Rs 19,457 crore (36 per cent of the EEB portfolio) as on September 30, 2021 compared to Rs 15,657 crore, (29.4%) as on June 30, 2021. The stress loan pool comprises of gross Non-performing assets + gross restructured assets + Special mention accounts in category 1 & 2.

In a late night statement said the private bank continues to collect (dues) in the above mentioned stressed portfolio. But, the uncertainty over the quantum and timing of the final recovery has prompted the bank to accelerate the provision for the entire pool of stress in the EEB segment.

The bank held 49 per cent provision on its gross stress pool of Rs 19,457 crore as on September 30, 2021. This provision is based on expected collections from the portfolio till March 2022 and estimated recoveries under various government schemes, it said.

witnessed collections of around Rs 1,000 crore in October 2021 from the stressed assets and targets to collect Rs 6,000 crore by March 2022.

In addition, the bank is targeting a recovery through the Credit Guarantee Fund for Micro Units (CGFMU) scheme of Rs 3,000 crore. This is apart from likely recover from the Assam Microfinance Incentive and Relief Scheme (AMIRS), but the value is not ascertained yet.

With accelerated provisions during Q2 FY22, the bank reported net losses during the quarter, while the Tier I capital ratio declined to 19.48 per cent in September 2021 from 23.85 per cent as on June 2021.

said the high level of provision on the stressed pool of assets (including standard accounts) provides some comfort. However, the ability of the bank to reduce its stressed pool of assets will continue to drive future credit provisions, profitability and capital.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 10 2021. 01:23 IST