Mumbai: Bandhan Bank has set a cautious yet ambitious target for fiscal year 2026, aiming for a 15-17% growth in assets under management (AUM). The bank is focusing on better recovery practices and maintaining asset quality, particularly in its emerging entrepreneurs business, which is expected to grow slowly at 5-8%. The bank’s management explains how improved collection strategies and regulatory changes will impact its growth in the coming months.
Bandhan Bank’s Growth Strategy for FY26
Bandhan Bank is embarking on a strategic growth path as it looks ahead to fiscal year 2026. In a recent earnings call, bank officials expressed their optimism about achieving double-digit growth despite a few headwinds. With a targeted increase in overall assets under management (AUM) between 15% and 17%, the institution is banking (pun intended) on improving recovery rates and keeping a close eye on asset quality. The emerging entrepreneurs business (EEB) faces significant challenges, forecasting growth between 5% and 8% due to larger regulatory guidelines and fluctuations in disbursement seasons.
Management noted that, on the asset quality front, the bank reported a slight improvement in slippages, confirming their earlier forecasts. Credit costs decreased from 3.9% to 3.5% in the previous quarter, signaling effective management strategies. While slippages within the EEB portfolio also showed some improvement, falling from ₹13.49 billion to ₹10.89 billion, the concern lies in the uptick of gross non-performing assets (GNPA) in retail and housing loans. These increases are largely attributed to stress from unsecured loans issued in prior fiscal years, but recovery initiatives are already underway, with minimal write-offs reported.
Improving Collection Mechanisms and EEB Challenges
To improve collections in the EEB segment, Bandhan Bank has implemented some innovative procedural changes. For example, the bank is now accepting advance collections of installments even on holidays and has introduced QR codes for seamless remote payments by customers. Despite these efforts, collection efficiency dipped marginally from 97.7% to 97.6% over the course of the quarter. This change reflects procedural shifts rather than an underlying weakness within the bank’s operational model.
The EEB segment has also faced hurdles in disbursement growth, hampered by a seasonal slowdown in the first quarter and the introduction of new regulatory guidelines that have tightened loan access for certain borrower categories. The bank estimates that about 16-18% of customers may not qualify for loans under these revised rules. Bandhan Bank’s geographic markets, especially in Tamil Nadu and Karnataka, remain under-indexed but have not seen substantial growth due to overarching industry constraints. The bank anticipates a gradual improvement in disbursements moving into the second quarter while acknowledging ongoing challenges in states like Uttar Pradesh and Gujarat.
Industry Dynamics and Future Outlook
Amid industry-wide changes, Bandhan Bank is adapting to new competitive conditions. With regulators now permitting entities to allocate up to 40% of their loan books to non-MFI loans, the competition for individual loans and small business advances is expected to increase. While the bank hasn’t raised lending yields, it anticipates that other lenders’ aggressive approaches could lead to tighter restrictions on non-MFI loans in the future.
In addition to the EEB segment, Bandhan’s non-EEB portfolio showed robust growth in the first quarter. The bank successfully completed a syndicate lending transaction for a client, which is anticipated to become a reliable revenue source moving forward. With its top five states contributing 58% of gross advances, down from 59% the previous year, this indicates a slight reduction in geographic concentration, a necessary adaptation for sustainable growth.
On the margins front, the bank reported a decrease in its net interest margin (NIM) stemming from a combination of factors, including a lower CD ratio and a repo rate cut. Currently, 52% of its loan book consists of fixed-rate loans, and the proportion of secured loans has also climbed to 52%, which positions Bandhan strongly against its FY27 target of 55%. Despite expectations for marginally lower margins in the near term due to changing loan mixes, the management reassures that the benefits of lower term deposit rates will clearly manifest as they mature within the year.
Navigating Near-Term Pressures
Looking ahead, Bandhan Bank is set on a dual strategy that balances the growing momentum in secured loans with a careful revival of the EEB segment. By adhering to new regulatory guidelines, improving collection practices, and diversifying revenue streams, the bank aims to mitigate near-term pressures that may arise and come out stronger. Management is optimistic that these strategies will yield a healthier loan book and enhanced profitability in the second half of FY26.
As Bandhan Bank steers through these strategic changes, the broader Indian economy remains a crucial backdrop. As businesses and consumers adjust to fluctuating economic conditions, the banking sector—including both established players and newer institutions—will need to adapt to survive and thrive in an increasingly competitive landscape. The path forward is marked not just by the numbers, but by the effective management of customer relationships and operational efficiency, ensuring that both growth and recovery become integral parts of their narrative.
💡 Bankerpedia’s Insight
The recent policy shift in India’s banking sector is pivotal, as it aims to enhance liquidity and bolster consumer confidence amid economic uncertainties. This move could facilitate easier access to credit for businesses and individuals, driving growth and stability. However, it’s crucial for readers to stay informed about potential interest rate changes and assess their personal finance strategies accordingly. Awareness and adaptability will empower individuals to navigate this evolving landscape, ensuring they make informed decisions in managing their investments and savings.
🤔 What Does This Mean for Me?
- Salaried Person → Influences job security, salary growth, and career opportunities.
- Business Owner → Increased costs may reduce profit margins significantly.
- Student → Increased stress and uncertainty about future opportunities.
- Self-employed → Increased costs may reduce profit margins significantly.
- Homemaker → Increased costs may strain household budgets significantly.
- Retiree / Senior Citizen → Increased living costs may strain retirement savings.
- Job Seeker → Job market trends could influence employment opportunities ahead.
- Farmer / Rural Citizen → Increased costs for goods, affecting livelihoods and stability.
📚 Research References
- bfsi.economictimes.indiatimes.com
- RBI
- SEBI
- Ministry of Finance
- NABARD
- Department of Financial Services (DFS)
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