Bandhan Bank has steadily carved a niche for itself in the Indian banking arena. Bandhan Bank’s specialty lies in micro-lending and is planning to increase its overall presence in the home loan category as per reports. This has happened post the portfolio takeover from Gruh Finance in recent times.
The loans under Gruh Finance now comprise of approximately 28% of the advances book at Bandhan Bank. The share of Bandhan Bank in the micro-finance loan category has come down to around 61% in comparison to 87% in the previous year. Home loans are the new growth area for many a banking institution, particularly as the Government has been emphasizing upon the affordable housing segment and flow of credit to the sector.
Bandhan Bank prioritizes home loans
The home loan share at Bandhan Bank is expected to increase in the near future as opined by the bank’s CEO and Managing Director, Chandra Shekhar Ghosh. The merged loan book at Bandhan Bank touched Rs. 64,186 crore as of the 30th of September, 2019. The bank’s gross NPA (non-performing assets) ratio stood at 1.76% while this was 0.56% for the net NPA ratio as well.
Bandhan Bank will continue emphasizing more on the affordable housing category and the average loan ticket size stands at approximately Rs. 9.5 lakh at present. Sudhin Choksey, the executive director at Bandhan Bank, had previously spearheaded Gruh Finance and has opined that credit growth for the affordable housing segment should not be affected hugely by issues of the real estate sector at the macro-level.
Close to 50% of the home loan portfolio taken over from Gruh Finance by Bandhan Bank comprises of loans in the self-construction category. Demand shifts at a steady rate in this case and considering the bank’s overall presence geographically, there could be more opportunities for going forward with demand as per Ghosh’s statements.
Other key details at Bandhan Bank
Bandhan Bank majorly focuses on lending activities in markets such as Bihar and West Bengal. Post this merger, it will now have a major presence in the States of Rajasthan, Maharashtra, Gujarat and Madhya Pradesh. These were previously considered as core zones for Gruh Finance. Gruh Finance was established by HDFC (Housing Development and Finance Corporation) in the year 1988. The housing finance company was merged into Bandhan Bank on the 17th of October, 2019. The shareholding of the Bandhan Bank promoter has touched 60.96% after this merger as compared to 82.26% previously.
It has not yet adhered to the 40% compliance level regulations as established for private sector lenders by the Indian banking regulator. In September 2018, the RBI (Reserve Bank of India) executed a withdrawal of its general permissions for Bandhan Bank with regard to setting up new branches and the remuneration of Chandra Shekhar Ghosh was also frozen likewise for failing to meet these regulations. The bank has to now get permission from the regulator for setting up each and every new branch at the moment. Ghosh has stated that he is striving to lower promoter shareholding to 40% going forward.
Decent profits garnered by Bandhan Bank
Bandhan Bank has posted net profits of Rs. 972 crore for the quarter that concluded in September this year. This is handsome, considering its profit of Rs. 488 crore in the same period in 2018. The net profits cannot be fully compared since the current results take into account the earnings of Gruh Finance. This housing finance company was merged into Bandhan Bank sometime earlier.
The loan book went up by a decent 37% for Bandhan Bank which does not take into account the portfolio of Gruh Finance. Post consolidation, 92% was the bank’s overall loan growth. Chandra Shekhar Ghosh has already opined that this merger was needed for diversification of the overall portfolio at Bandhan Bank. He also added that his share has reduced accordingly. 106 Bandhan Bank branches have now been facilitated with loan sales of Gruh Finance under the current business model. All incoming personnel from Gruh Finance have been taken on-board based on the newly established housing finance division. They will be growing the affordable home loan goals of Bandhan Bank.
Customer IDs have already been given by Bandhan Bank to all Gruh Finance loan customers. In fact, as mentioned, Sudhin Choksey, the ex-Managing Director at Gruh Finance, has already taken over the housing finance division. He will also be appointed as the bank’s executive director.