Detailed Narrative
Strategic Pivot to 'Bandhan 2.0'
Under the new leadership of MD & CEO Partha Pratim Sengupta, the bank is accelerating its transition from a microfinance-heavy institution to a diversified universal bank. A key pillar of this 'Bandhan 2.0' strategy is increasing the secured loan mix from the current 49% to over 55% by FY27. This shift involves aggressive growth in housing loans, gold loans, and commercial vehicle financing, while maintaining a more calibrated, 'secular' approach to the microfinance (EEB) book.
Asset Quality Headwinds in Microfinance
The EEB portfolio faced significant stress this quarter, with slippages rising to ₹1,196 crores. Management attributed this to industry-wide headwinds and elevated risks in the MFI segment. To address this, the bank implemented a technical write-off of ₹1,266 crores and introduced stricter 'guardrails,' such as a 2+1 lender rule and a 30-day DPD cutoff for new lending, which is more conservative than the industry standard.
NIM Compression and Yield Dynamics
NIM moderated to 6.9% in Q3 FY25, down from 7.4% in the previous quarter. This compression was driven by two primary factors: a deliberate shift in the product mix toward lower-yielding secured assets and the impact of higher slippages. Management expects NIMs to remain in the 7.0% to 7.5% range for the full year, acknowledging that the transition to a universal bank model naturally leads to lower but more stable margins.
One-off Items Impacting Financials
The quarter's results were heavily influenced by several non-recurring📎 items. On the positive side, the bank booked ₹538 crores from a CGFMU claim payout and ₹52 crores from the Assam government. However, these were offset by a ₹166 crore one-time📎 expense related to ESOP accounting changes and ₹1,376 crores in total provisions, which included ₹336 crores specifically linked to the technical write-offs.
Liability Franchise Strength and Diversification
Bandhan Bank continues to demonstrate a robust ability to raise deposits, with total deposits growing 20% YoY to ₹1.41 lakh crore. The bank is consciously reducing its reliance on bulk deposits to focus on granular retail deposits, which now make up 69% of the total. Geographic diversification is also progressing, with the share of advances in East and North East regions dropping from 53% in FY22 to 39% this quarter.
Operational Transformation and Efficiency
Management announced the formation of several new specialized units to drive future growth and efficiency. These include a Transformation Management Team, a Digital and Transaction Excellence Unit (DTEU), and a Market Intelligence Team that uses AI/LLMs to monitor commercial borrowers. These initiatives aim to improve underwriting standards, enhance customer experience, and eventually lower the cost-to-income ratio as productivity gains materialize.