🏦 What’s Wrong with Bandhan Bank Ltd?

 

Bandhan Bank Ltd has been facing operational and financial hurdles in recent years, dampening its growth and investor sentiment. Here are the key pain points:

1️⃣ Asset Quality Concerns

📉 Collection Efficiency Drop
In Q3 FY25, Bandhan Bank’s collection efficiency slipped to 97.6%, down from 98.2% in the previous quarter.
✅ Indicates rising stress in its loan portfolio
✅ Potential risk of elevated credit costs

2️⃣ Geographic Concentration Risk

🗺️ Too Focused on a Few Regions
A large chunk of Bandhan Bank’s loan book remains concentrated in West Bengal and Assam, exposing it to:

• Local socio-political instability
• Natural calamities
• Regional economic fluctuations

3️⃣ Regulatory Compliance Issues

⚖️ Fined by RBI
The Reserve Bank of India levied a penalty of ₹29.55 lakh due to:

• Non-compliance with interest rate norms
• Reporting discrepancies

4️⃣ Leadership Transition

👤 New CEO in Challenging Times
In Oct 2024, Partha Pratim Sengupta took over as MD & CEO. While experienced, the transition happens when the bank is still trying to stabilize its operations.

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🛠️ How Is Bandhan Bank Tackling These Challenges?

Despite headwinds, Bandhan Bank is actively working to turn things around with a multi-pronged strategy:

✅ Strengthening Asset Quality & Credit Oversight

• Formation of specialized teams for proactive credit monitoring
• Focus on limiting delinquencies in the microfinance segment

✅ Driving Digital Innovation

• Revamping its tech stack
• Enhancing user experience through digital onboarding and services
• Investing in mobile and internet banking platforms

✅ Strategic Vision Under New Leadership

CEO Sengupta has laid out a clear roadmap:

• 🔹 Retail Deposit Focus: Shifting to stable, granular retail deposits
• 🔹 Loan Portfolio Mix: Targeting 55% secured loans by FY27
• 🔹 Geographic Diversification: Expanding beyond core states

✅ Robust Risk Management Framework

• Updated credit appraisal systems
• Stricter exposure guidelines
• Portfolio diversification across sectors

✅ Improved Regulatory Compliance

• Addressed prior gaps and passed audits
• Secured a ₹315 crore payout from National Credit Guarantee Trustee Company

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🚀 What New Segments Is Bandhan Bank Targeting?

To evolve from its microfinance-heavy identity, Bandhan Bank is entering promising new verticals:

🏠 1. Retail Lending – Secured Focus

Expanding into lower-risk, stable segments:
✅ Home Loans
✅ Gold Loans
✅ Vehicle (2-Wheeler & Auto) Loans

🧾 2. MSME & SME Credit

Targeting India’s rapidly growing small business segment:

• Higher yields
• Broader geographic exposure
• Diversifies loan book from traditional segments

🏘️ 3. Affordable Housing Finance

• Aligned with govt. initiatives like PMAY
• Tapping demand from Tier 2 & Tier 3 cities
• Attracting first-time homebuyers

💻 4. Digital Banking & Fintech Collaborations

• Strengthening backend systems
• Partnering with fintech for:
  ✅ Loan underwriting
  ✅ Digital payments
  ✅ Customer acquisition
• Reducing operational costs through tech

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📊 Final Take

Bandhan Bank is undergoing a pivotal transformation—from a regional, microfinance-centric player to a pan-India retail and SME-focused bank. While challenges persist, its growth-oriented strategy, risk controls, and leadership change signal a determined pivot toward long-term sustainability.

💡 Investor Insight: The next few quarters will be critical in determining how well these strategies translate into growth, profitability, and investor confidence.