Overview

Bandhan Bank Limited (NSE:BANDHANBNK) was incorporated on 23rd December 2014 as a wholly-owned subsidiary of Bandhan Financial Holdings Limited. Bandhan received the 'in-principle' approval OF the Reserve Bank OF India (RBI) for setting up a universal bank in April 2014; the banking regulator gave its Final nod in June 2015. Incidentally, Kolkata-headquartered Bandhan is the First bank to be set up in eastern part OF India after Independence.

Bandhan Financial Holdings Ltd. is owned by Bandhan Financial Services Limited (BFSL), the largest micro finance organization in India. Its public shareholders include International Finance Corporation (IFC) FIG Investment Company, Small Industries Development Bank of India (SIDBI), Caladium Investment Pte. Ltd. (a company managed by GIC Special Investments Private Limited) and a few individuals.¹

The Bandhan Group received a conditional approval From the Reserve Bank of India (RBI) For setting up a universal bank in April 2014 — one of the two among 25 applicants that included some of the big business conglomerates in India. The banking regulator gave its final nod in June 2015.

Late Shri Arun Jaitley, Union Minister for Finance, Corporate Affairs and Information & Broadcasting, Government of India, inaugurated the bank on August 23, 201 5 in Kolkata — the First bank to be set up in eastern part of India after Independence. The grand function was attended by the regulators, policy makers and luminaries from Financial sector and corporate India. Late Shri Pranab Mukherjee, the then, Honourable President of India, graced Bandhan Bank's First anniversary Function on August 23, 2016 in Kolkata.

Bandhan Bank is driven by a constant desire to serve better. Bandhan Bank started with 501 branches, 50 ATMs and 2,022 Banking Units on day one. Presently, Bandhan Bank has 4,586 banking outlets pan-India serving more than 2.03 crore customers.

The bank has mobilised deposits more than Rs. 60,610 crore and its total advances stand at Rs. 74,331 crore taking the total business to Rs.1,34,941 crore as on June 30, 2020. The bank has a team of 41,563 employees on roll.

Bandhan Bank offers its world-class banking products and services to urban, semi- urban and rural customers alike. It is a bank For all but the Focus remains unchanged to meet the Financial needs of people who are overlooked by the formal banking system and create better education, health care and self-employment opportunities. In sync with the philosophy of 'Aapka Bhala, Sabki Bhalai' and keeping financial inclusion at the heart of it, Bandhan is committed to provide a host of products and services, competitively at par with India's top private and state-owned banks.

The success of the organization is measured by the million lives it has touched and the communities that have blossomed with its tireless efforts. Simply put, when you choose to bank with Bandhan, you are choosing to be instrumental in the nation's larger growth story.

Indian Banking: Key industry developments

As per the RBI, non-food credit (‘NFC’) grew at around 6 per cent year-on-year in March 2020 vis-à-vis over 13 per cent in March 2019 primarily owing to a decline in lending to service sector

According to the RBI, credit growth for agriculture and allied segment at 4.2 per cent has seen a decline in March 2020 as compared to 7.9 percent in March 2019.²

The microfinance industry is witnessing a robust growth. As per the latest MicroFinance Institutions Network (‘MFIN’) report, the microfinance industry has witnessed a year-on-year growth of 29 per cent in FY 2019-20. Market share of Banks and NBFC-MFIs stood at 40 per cent and 32 per cent respectively as on Q4 FY 2019-20. Banks have witnessed year-on-year growth of 54 per cent and NBFC-MFIs witnessed year-onyear growth of 10 per cent in Q4 FY 2019-20. Growth of banks is much higher than NBFC primarily due to merger of one MFI with a bank in Q1 FY 2019-20.

The Government of India has made a capital infusion of close to ₹2 trillion in public sector banks in last 2 years. Majority of the amount (about two-thirds) has been received by banks under Prompt Corrective Action framework of RBI

The Cabinet Committee of Economic Affairs approved merger of 10 public sector banks into 4 banks effective from April 01, 2020, bringing down the count of public sector lenders to 12 from 21. The consolidation is expected to drive higher scale of operations, improved efficiency and better capital management.

As per Financial Stability Report of the RBI dated December 27, 2019, the gross NPA of Indian banking industry was 9.3 per cent in September 2019, unchanged from March 2019 NPA. Macro-stress tests for credit risk reveal that under baseline scenario, GNPA ratio is likely to increase to 9.9 per cent in September 2020. However, on account of the ongoing crisis of COVID-19, the banking industry is likely to witness a negative impact on the portfolio quality, leading to an increase in GNPA as compared to the previous estimate.

Business Segments

Micro Banking

The Bank’s micro finance strategy is guided by its philosophy of financial inclusion and economic empowerment of the disadvantaged sections of the society

In FY 2019-20, the Bank opened 332 new Banking Units (earlier known as Door Step Service Centers or DSCs) and offered micro loans to 22,69,272 new borrowers. The growth of over 19.6 per cent in the aggregate micro-banking asset portfolio from ₹38,614.60 crore to ₹46,189.09 crore during FY 2019- 20, is another indicator of the commitment.

Small Enterprise Loan (SEL)

The Bank’s portfolio in Small Enterprise Loan (‘SEL’), a unique business loan product for small and mid-size entrepreneurs, is available in amounts between ₹1 lakh to ₹10 lakh. The loan outstanding was ₹2,065.95 crore as on March 31, 2020.

In FY 2018-19, as a step forward towards the financial inclusion commitment of the Bank and to reach deeper in to the bottom of pyramid in the agriculture sector, the Bank launched Kisan Loan product under KCC scheme of the Reserve Bank of India.

Initially offered through selective branches in Madhya Pradesh, the Bank has expanded its’ presence in Madhya Pradesh, Haryana and Punjab in FY 2019-20.

Small & Medium Enterprises Loan (SME)

The SME business vertical focuses on loans with ticket size of more than ₹10 lakh, which are extended to business entities involved in manufacturing, trading and services through products designed to cater to their specific business needs. This vertical also covers lending to NBFCs and MFIs.

The range of products offered includes fund based facilities such as cash-credit, term loans, overdrafts, demand loan and non-fund based facilities such as bank guarantees and inland letter of credit.

The MFI Lending business vertical lends to Micro Finance Institutions, Society and Trusts engaged in micro finance activities. While most of these loans are given as Term Loans, the Bank also has credit exposure through Direct Assignments. Leveraging its rich experience in micro banking, the Bank has developed an internal credit rating model to assess the credit risk while lending to this segment.

The Bank has expanded its MFI lending business by providing financial assistance to Micro Finance Institutions operating across geographies namely Assam, West Bengal, Odisha, Punjab, Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh, Karnataka, Kerala and NCT of Delhi. The MFI lending portfolio stood at ₹2,476 crore on March 31, 2020.

In FY2019-20, lending to SMEs (including NBFCs and MFIs) stood at ₹4,281.68 crore, a growth of 54 per cent from last year.

Retail Assets

The Bank offers loans to individual retail customers (such as Home Loan, Loan Against property, Personal Loan and Two Wheeler Loan). As on March 31, 2020, the total retail asset outstanding stood at ₹19,309 crore.

With the acquisition of GRUH Finance, the Bank has put forward a big step in expanding its retail portfolio. All loans provided by erstwhile GRUH Finance are now called GRUH home loans. These include loans for acquisition and construction of new residential property, renovation of existing residential property and loan against property. The mortgage portfolio of the Bank stood at ₹18,578 Crore as on March 31, 2020.

During FY 2017-18, the Bank forayed into the gold loan business by commencing gold loan operations at 57 branches in eastern India. The number of branches grew to 177 in the FY 2019-20. In FY 2019-20, the Bank had witnessed a significant growth of 73 per cent in gold loan portfolio and the loan book stood at ₹221.94 crore from 32,884 accounts.

Third-party Products

The strategic focus of the Bank is to become a onestop-shop experience for all banking services to its customer. Accordingly, the Bank has a distribution model for third party products. In order to further strengthen customer proposition, the Bank will assess the customer requirements for new third party products and accordingly fulfill the needs of the customers considering their risk profile.

The Bank currently distributes mutual funds and standalone health insurance products along with General and Life Insurance products. Mutual funds are being distributed only through select metro, urban and semi urban branches. As on March 31, 2020, 534 branches are ‘live’ for mutual fund distribution and 1,009 branches are activated for sourcing Health Insurance business.

Total mutual fund business sourced in FY 2019-20 was ₹89.35 crore earning an income of ₹2.08 crore. The total Health Insurance business done in the FY 2019-20 was ₹80.19 crore earning a total fee income of ₹11.16 crore. Additionally, a total of ₹3.52 crore and ₹198.67 crore of General & Retail Life Insurance business was garnered through the branches in the FY 2019-20 earning a fee income of ₹0.34 crore and ₹28.67 crore respectively. In FY 2019-20, life insurance business through the existing arrangement in the micro banking and other asset verticals amounted to ₹660.10 crore earning an income of ₹33.00 crore.

The Bank has earned ₹31.14 lakh as commission from Co-Branded Credit Card distribution in FY 2019-20.

The Bank has earned ₹20.56 lakh as commission for distribution of Atal Pension Yojana and NPS Lite Swavalamban schemes of PFRDA in FY 2019-20

Merchant Acquiring Business

In FY 2016-17, the Bank started setting up point-ofsale(‘PoS’) terminals across India in major towns and cities as well as comparatively smaller, cash-intensive towns and villages

During the FY 2019-20, the Bank installed 5,034 EDC- PoS terminals and transactions worth ₹6,532.24 crore were carried out on the Bank’s installed terminals.

Business Overview

The Bank had commenced its business on August 23, 2015, and within five years of its opertation it has grown to 4,559 banking outlets as on March 31, 2020. During the financial year, the number of banking outlets that have been added in the network is 559. Out of the total number of 4,559 banking outlets, 35 per cent were in rural, 36 per cent in semi-urban, 19 per cent in urban and 10 per cent were in metro. The number of customers has increased from 1.66 crore as on March 31, 2019 to 2.01 crore as on March 31, 2020. With the expanding network of banking outlets and customers, the total deposits increased from ₹43,231.62 crore as on March 31, 2019 to ₹57,081.50 crore as on March 31, 2020 registering an increase of 32.04 per cent. The Current Account and Savings Account (‘CASA’) deposits also increased from ₹17,617.73 crore to ₹21,028.46 crore which is an increase of 19.36 per cent.

During the year under review, the total income of the Bank increased by 41.65 per cent. to ₹7,873.11 crore as against the total income for FY 2018-19 of ₹5,558.47 crore. The profit after tax (‘PAT’) as at the end of the financial year under review was ₹3,023.74 crore, an increase of 54.94 per cent. over the previous financial year of ₹1,951.50 crore. Further, Return on Average Equity (‘ROAE’) was 21.07 per cent in FY 2019-20 as against 19.00 per cent. in FY 2018-19. Return on Average Asset (‘ROAA’) was 3.64 per cent in FY 2019-20 as against 4.23 per cent in FY 2018-19. The Bank’s basic earnings per share (‘EPS’) increased from ₹16.03 to ₹18.78, and diluted earnings per share from ₹16.01 to ₹18.76 as at the end of FY 2018-19 and FY 2019-20, respectively. The net interest margin (‘NIM’) was 8.12 per cent in FY 2019-20 as against 10.43 per cent. in FY 2018-19.

The Bank has two types of banking outlets: bank branches catering to general banking customers and Banking Units (‘BU’) catering to micro banking customers. The Bank offers a wide array of loans to benefit small business owners in need of financial assistance. It also helps in the growth of additional income generation avenues, and offers enhanced opportunities to small entrepreneurs to achieve their business goals.

Each BU is linked to a bank branch for operational convenience. BUs are self-sufficient and empowered to open deposit accounts using tablets and also open loan accounts after necessary credit bureau(s) checks. The highlight of BUs operations is the TABs that are connected to the Core Banking System (CBS) through cellular data. The Bank’s Relationship Officers carry these TABs in their group meetings, and the entire instalment reconciliation for the customer happens through these TABs in real time. To ensure timely and effective support to the BUs in their day-to-day functioning, the Bank has a structure comprising a territory, and a central operations team. These operations teams maintain oversight of the quality of the operations and adherence to prevalent guidelines at all times. The Bank lays significant emphasis on processes and controls to help maintain uniform and consistent standards in transaction processing and service delivery, as well as compliance with regulatory and statutory guidelines.

The Bank’s microfinance strategy is guided by its philosophy of financial inclusion and economic empowerment of the disadvantaged sections of society. During FY 2019-20, the Bank opened 332 new BUs Pan-India with sole focus of financial inclusion. The Bank’s commitment to financial inclusion is also reflected from the fact that it offered loans of 22,60,958 new borrowers during FY 2019-20. The growth of over 19.61 per cent in the aggregate micro banking asset portfolio from ₹38,614.60 crore to ₹46,189.00 crore during FY 2019-20, is another indicator of the Bank’s commitment.

Under the Small Enterprises Loan (‘SEL’) scheme, loans between ₹1 lakh and ₹10 lakh, are offered for income generating activities of small enterprises, which are described as enterprises with equipment investments below ₹25 lakh. SEL has helped the Bank to enhance its objective of financial inclusion with significant increase in lending to small enterprises. As on March 31, 2020, total SEL loan outstanding was ₹2,065.95 crore from 84,140 customers as against ₹1,497.36 crore from 84,787 customers as on March 31, 2019, a growth of 38 per cent. which has been acheived through its network in 946 bank branches.

During the financial year under review, the Bank acquired GRUH Finance Limited (‘GRUH’) with an all-stock deal where 568 equity shares of ₹10 each, fully paid-up of the Bank, was issued for every 1,000 equity shares of ₹2 each fully paid-up of GRUH held as on October 17, 2019 being the record date for that purpose. Accordingly, the Bank issued 41,69,48,659 equity shares to the shareholders of GRUH. Further, on the effectiveness of the Scheme of Amalgamation on October 17, 2019, GRUH amalgamated with the Bank and dissolved without winding up and consequently all assets, liabilities, claims, properties, employees, etc. of GRUH were transferred to the Bank as on January 01, 2019 being the appointed date including 195 GRUH centres which became banking outlets of the Bank.

Financial Highlights

Highlights for the Quarter ended June 30, 2020:³

• Net Interest Income (NII) for the quarter grew by 14.98% to ₹1,811 crore as against ₹1,575crore in the corresponding quarter of the previous year.
• Non-interest income grew by 16.92% to ₹387 crore for the quarter ended June 30, 2020 against ₹331 crore in the corresponding quarter of the previous year.
• Operating Profit for the quarter increased by 16.81% to ₹1,584 crore against ₹1,356 crore in the corresponding quarter of the previous year.
• Net Profit for the quarter shrink by 31.59% to ₹550 crore against ₹ 804 crore in the corresponding quarter of the previous year. However, net profit for the quarter increased by 6.38% against the previous quarter. In Q1 FY 21, The Bank has taken accelerated additional provision on standard assets amounting to Rs 750 crore for COVID-19.
• Net Interest Margin (annualised) for the quarter ending June 30, 2020 stood at 8.15% against 8.13% in March 31, 2020.
• Total Advances (on book + off book+TLTRO) grew by 17.68% to ₹74,331 crore as on June 30, 2020 against ₹63,164 crore as on June 30, 2019 and 3.46% QoQ against ₹71,846 crore as on March 31, 2020.
• Total Deposits increased by 35.30% to ₹60,610 crore as on June 30, 2020 as compared to ₹44,796 crore as on June 30, 2019 and 6.18% QoQ against ₹57,082 crore as on March 31, 2020.
• Gross NPAs as on June 30, 2020 is at ₹1007 crore (1.43%) against ₹1020 crore (1.70%) as on June 30, 2019.
• Net NPAs as on June 30, 2020 stood at ₹336 crore (0.48%) against ₹348 crore (0.59%) as on June 30, 2019.

Bandhan Bank Q3 profit falls 14% at Rs 633 crore ⁴

January 21, 2021; Bandhan Bank on Thursday reported 13.5 percent decline in net profit at Rs 632.6 crore for the third quarter ended December 31, 2020.

Bandhan Bank on Thursday reported 13.5 percent decline in net profit at Rs 632.6 crore for the third quarter ended December 31, 2020.

The bank had posted a net profit of Rs 731 crore for the same period of the previous fiscal year.

Total income during the period under review rose 38.3 per cent to Rs 2,625 crore from Rs 1,898 crore in the same period of 2019-20, Bandhan Bank said in a press release.

"During the quarter the bank has taken accelerated additional provision on standard advances amounting to Rs 1,000 crore. With this provision and additional standard assets provision that bank is carrying in micro banking portfolio total additional provision in books stands at Rs 3,119 crore,” the bank said.

On asset front, gross NPAs as on December 31, 2020 stood at Rs 859.2 crore (1.1 percent of gross advances) against Rs 1,182 crore (1.9 percent) by the year-ago same period.

Net NPAs were at Rs 201.3 crore (0.3 percent) against Rs 491.4 crore (0.8 percent.).

References

1. ^ https://www.bandhanbank.com/busines-overview.aspx
2. ^ https://www.bandhanbank.com/pdf/Annual-Report-FY2019-20_BBL.pdf
3. ^ https://www.bandhanbank.com/pdf/Press-Release-Bandhan-Bank-Q1FY-2020-21.pdf
4. ^ https://www.moneycontrol.com/news/business/earnings/bandhan-bank-q3-profit-falls-14-at-rs-633-crore-6378351.html