After 5 years and 64% of its book tied to micro loans, Bandhan treads with caution amid COVID-19 crisis

Chandra Shekhar Ghosh
Chandra Shekhar Ghosh

Bandhan Bank’s final quarter numbers show a cautious approach. The bank has made an extra arrangement of Rs 1,000 crore in the January-March quarter, of which Rs 690 crore is coronavirus-related arrangements and Rs 310 crore extra standard resource arrangement made on microfinance portfolio.

The arrangement alludes to the amount a bank needs to save, under the Reserve Bank of India standards, against potential misfortunes from credit accounts. In exclusive cooperation with Moneycontrol on Tuesday evening, Bandhan’s Managing Director and CEO Chandrashekhar Ghosh sounded sure about the bank’s monetary presentation.

Ghosh said the bank is completely arranged to confront the coronavirus shock. On the advantage quality front, Bandhan has indicated great patterns in the quarter. The gross non-performing resources (NPA) as a level of gross advances tumbled to 1.48 percent in the March quarter contrasted and 2 percent in the last year’s quarter.

Bandhan Bank’s whole small scale credit book, Rs 46,200 crore, is under the ban. That is to be expected, said Ghosh referring to the challenges to arrive at the clients in the lockdown time frame. As indicated by the bank’s introduction, 79 percent of the microfinance borrowers have a normal store parity of around Rs 3,070 that is sufficient to cover a month’s credit installments.

The bank expects that the assortments should improve in about a month’s time frame once the lockdown is lifted. In the home loan book, 13% of clients by esteem have decided on the ban, and in the little and medium undertakings section (SME), the proportion is around 35 percent. With regards to NBFC-MFIs, around 59% of borrowers in esteem have profited the ban office.

The ban scheme was reported by the RBI on March 27 to help the financial division tide over the coronavirus lockdown stage. This allows banks to concede EMIs falling between March 1 and May 31. The bank has guided the financial specialists that the greater part of its borrowers have adequate incomes and the ban is benefited mainly to monitor money.

The quality of Bandhan lies in its heritage in working with the low-salary microcredit borrowers. Bandhan’s Ghosh has manufactured the microfinance organization without any preparation before developing it to a bank in over a  decade and a half. Bandhan finished five years as a bank this year and the center quality keeps the client segment it knows well, micro borrowers.

The bank has 64% of its complete advance book of Rs 71,846 crore attached to microcredit. The borrower segment is generally low-salary gatherings. The bank has taken the other plans to cover the reasonable misfortunes on this portfolio. Given the alert, the bank shouldn’t have any issue in the close term. However, the situation could change if the lockdown gets delayed.

There is noteworthy vulnerability ahead in the economy by the coronavirus lockdown. The pandemic has incited many banks to make forthright arrangements to cover the presumable misfortunes. Last Saturday, ICICI Bank said it has put aside Rs 2,725 crore to cover the COVID sway. Pivot Bank also has made Rs 3,000 crore arrangements on COVID.

Bandhan’s high reliance on microcredit advances is in a manner a help for the bank since the recuperation rate in this client fragment is high contrasted and medium-sized companies or enormous borrower. So, it is basic for Bandhan to perceive how the coronavirus situation will play out eventually in its borrower segment. Accordingly, the bank should step up its strategy in the following quarter. If the lockdown gets broadened further, the current counts could turn out badly.