Bandhan Bank Limited — Q3 FY26 earnings call

Call held 22 Jan 2026

Management summary

Bandhan Bank reported a mixed Q3 FY26, characterized by robust advances and deposit growth, particularly in retail and secured segments. Asset quality saw significant improvement with reduced NPAs and slippages following an ARC sale. However, profitability was impacted by a one-time gratuity provision and a YoY decline in non-interest income, while CASA deposits experienced a YoY decline.

Highlights

  • Gross advances grew 10% YoY to Rs 1.45 lakh crores, with underlying growth of 12% YoY and 6% QoQ when adjusted for NPA sale.

  • Total deposits grew 11% YoY to Rs 1.57 lakh crores, demonstrating focus on funding stability.

  • Retail term deposits showed strong momentum, growing over 36% YoY.

  • Secured book grew 27% YoY, now comprising 57% of total advances, improving risk profile.

  • Net Interest Margin (NIM) improved sequentially to 5.9% in Q3 FY26 from 5.8% in Q2, aided by a nearly 20 bps reduction in cost of deposits.

  • Gross NPA ratio improved sharply to 3.3% and Net NPA declined to 1% following the ARC sale.

  • Overall collection efficiency (excluding NPAs) improved to 98.1% in Dec'25 from 97.8% in Sept'25.

  • Bank-wide gross slippages declined to Rs 1,314 crores in Q3FY26 from Rs 1,590 crores in Q2FY26.

Concerns

  • Net profit for Q3FY26 was Rs 206 crores, a significant decline from Rs 426 crores a year ago.

  • Operating expenses rose 6% sequentially to Rs 1,934 crores, largely due to a one-time Rs 120 crores provision for gratuity.

  • CASA deposits declined 4% YoY to Rs 42,730 crores, primarily due to savings rate reductions.

  • Non-interest income showed a 38% YoY decline, despite a 27% QoQ improvement.

Key financials

  1. Gross Advances ₹1.45L Cr +10%YoY
  2. Total Deposits ₹1.57L Cr +11%YoY
  3. NIM 5.9%
  4. Gross NPA Ratio 3.3%
  5. Net NPA Ratio 1%
  6. PAT ₹206 Cr
  7. RoA 0.4%
  8. RoE 3%
  9. PCR (incl. technical w-offs) 84.3%
  10. Slippages (Bank-wide) ₹1,314 Cr
  11. Credit Cost 3.3%
  12. CASA Deposits ₹42,730 Cr -4%YoY
  13. CASA Ratio 27%
  14. Operating Profit ₹1,445 Cr
  15. Net Interest Income (NII) ₹2,688 Cr +3.8%QoQ
  16. Capital Adequacy Ratio 17.8%
  17. Tier I Capital 17%

What they filed

Q1 FY27: revenue up 2.8%, net profit up 34.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue5,500 5,479 5,434 5,476 5,354 −3%5,431 −1%5,428 −0%5,631 +3%
Net profit937 426 318 372 112 −88%206 −52%534 +68%502 +35%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentShare of Total AdvancesYoY Growth
EEB Book22%-11%
Non-EEB Portfolio65%25%
Retail Assets—57%
Wholesale Banking31%32%
Secured Book57%27%
SBAL12%—
Housing23%—
Retail Loans10%—

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Capital Adequacy Ratio stands at 17.8% and Tier I capital at 17.0%, providing ample headroom to support future growth.
    Our capital position remains robust. Including 9MFY26 profit, the Capital Adequacy Ratio stands at 17.8% and Tier I capital at 17.0%, providing ample headroom to support future growth

Guidance & targets

Credit Cost

  • Overall Credit Cost Credit Cost · end of FY27 · High confidence 1.6%-1.7%
    Our guidance is at the end of FY27, we are still hopeful that we will probably be achieving 1.6%-1.7% of credit cost.

    — Partha Pratim Sengupta

  • EEB Credit Cost Credit Cost · end of FY27 · High confidence 2.5%-3%
    1.6% to 1.7% overall and 2.5% to 3% for EEB.

    — Rajeev Mantri

NIM

  • NIM NIM · for the rest · Medium confidence 6%
    we hope that we will continue to maintain at this rate, so 6% on for the rest.

    — Partha Pratim Sengupta

  • NIM Trajectory NIM · next two to three quarters · High confidence improvement
    We expect this cost of funds improvement to continue over the next two to three quarters and the NIM trajectory it will improve from.

    — Rajeev Mantri

CASA Ratio

  • CASA Ratio CASA Ratio · soon (within 1-2 quarters) · High confidence 31%
    our effort is that we should soon reach that number, 31%. ... Maybe one, two quarters needed, but definitely, we will be achieving that. That's our target.

    — Partha Pratim Sengupta

Growth

  • Advances and Deposit Growth CAGR Growth · next 2 to 3 years · High confidence 15%-17%
    our overall guidance that we have given is a 15% to 17% CAGR on advances and deposit growth to be higher than that. This is over the next 2 to 3 years.

    — Rajeev Mantri

Portfolio Mix

  • Unsecured vs Secured Mix Portfolio Mix · maintain · High confidence 35%-40% unsecured, 60%-65% secured
    this balance we want to maintain, so 35%, almost 40% will be unsecured and 60% will be secured.

    — Partha Pratim Sengupta

What to watch in Q4 FY26

NIM trajectory

Next two to three quarters
Current 5.9% (Q3 FY26)
Target Further improvement from Q2 FY26 bottom

Why it matters

NIM is a core profitability metric, and management expects continued improvement from easing cost of funds.

We expect this cost of funds improvement to continue over the next two to three quarters and the NIM trajectory it will improve from. ... We are confident that in Q2, we saw a bottom of the NIMs, at least for this financial year, and therefore, some further improvement should be expected from these levels.

Risks & concerns

  • Legacy NPAs and need for balance sheet cleansing

    high

    Sale of Rs 3,707 crores of written-off portfolio and Rs 3,165 crores of NPAs to ARCs was executed to strengthen the balance sheet, impacting profit but improving NPA ratios.

    Management addressed proactively

  • Impact of new labor codes on employee costs

    medium

    A Rs 120 crores provision for gratuity was made this quarter due to revised wage definition; further assessment needed for other items once state rules are out.

    Management acknowledged

  • Softness in CASA ratios industry-wide

    medium

    CASA deposits declined 4% YoY to Rs 42,730 crores due to savings rate reductions, but core granular savings are gaining traction.

    Management acknowledged

Q&A highlights

7 direct
EEB Slippages and Recoveries Direct
So, during the quarter, EEB slippages has been to the tune of Rs 942 crores. There has been a significant improvement - In Q1, it was Rs 1,089 crores; Q2, it was Rs 1,118 crores. So almost Rs 170 crores down from what we have seen in the previous quarter. And the recoveries were Rs 113 crores. So, the net slippage was Rs 829 crores for EEB.

Provides specific, detailed breakdown of asset quality metrics for the key EEB segment, showing improvement in slippages.

Asked by Jai Mundhra

ARC Sale Details and Impact on PCR Direct
I think Rs 3,165 crores of NPA sale, we got a value of 18% that amounts to a deal value of Rs 570 crores. We got the cash from the ARC of Rs 303 crores, which represents 53.25%, and our share, Bandhan Bank share, was Rs 266 crores, which is 46.7%. ... the write-off pool of about Rs 3,707 crores, which was sold to Phoenix. And for that, we got a deal value of about 9%. The deal value was Rs 332 crores. The cash that we received was Rs 126 crores, representing around 38% and our investment, which is Bandhan Bank's investment, was 62% amounting to Rs 206 crores.

Clarifies the complex details of the ARC sale, the cash received, and the SRs retained, which significantly impacted reported NPAs and provisions.

Asked by Jai Mundhra, Piran Engineer

Mortgage Book Asset Quality and Underwriting Changes Direct
So, the first thing what we have done, and we are gradually on the process of stabilization and if you can look at it, it was on-boarding, underwriting and also the operations were done by the same person and especially in the affordable segment, the risk was increasing. So, we have changed the system. Now, it is a completely different set of people doing the on-boarding, and underwriting is independent and then finally, the operations who just look into the entire thing before the disbursement of the loan.

Explains the root cause of past asset quality issues in the housing finance segment and the specific operational and underwriting changes implemented to address them.

Asked by Piran Engineer

Credit Cost Guidance Direct
Our guidance is at the end of FY27, we are still hopeful that we will probably be achieving 1.6%-1.7% of credit cost. ... 1.6% to 1.7% overall and 2.5% to 3% for EEB.

Provides specific long-term credit cost targets, which is a key profitability driver for banks.

Asked by Jai Mundhra, Anand Dama

Employee Intensity and MFI Portfolio Direct
I do agree what you have said is also what we have made an internal deliberation, and also, yes, that it's okay. But the question is that you see the - EEB AUM has come down today compared to a year ago, but we are still optimistic that it will go up. So suddenly, we can't take hard measures and asking that employees to just leave. ... we have already done some rationalization by putting a lot many of our business, I would say that, what we called as, RO that -- who are just responsible for booking business, we have placed them in the collection zone. So, we are strengthening our collection and done some bit of restructuring of our employees.

Addresses concerns about operating leverage and cost efficiency given the declining MFI portfolio, detailing steps taken to optimize employee deployment and improve productivity.

Asked by Nitin Aggarwal

New Labor Codes Impact Direct
The labor code impact that we have given is about Rs 120 crores, mainly towards gratuity. ... based on the actual valuation, we've taken Rs 120 crores impact on the financials. ... there are certain rules which have yet to be announced by various states, etcetera, so we are awaiting those to come through. As they come through, we'll do a further assessment of any further items, which could be having implications, and then, accordingly, come back to the investors.

Quantifies the immediate financial impact of the new labor codes and indicates potential future impacts pending further state-level rules.

Asked by Anand Dama

EEB Repayment Flexibility and Tenure Elongation Direct
So, we have now started from this month itself doing the pilot from December month. Fortnightly and monthly repayment for easy loans, primarily for group loans. ... we had tenure of 12 and 24 months. Now, we are doing a flexible tenure extensions of 18 and it goes up to 36 months as well for the highest ticket size.

Details product enhancements aimed at improving customer convenience and reducing repayment stress, which could positively impact asset quality and collection efficiency.

Asked by Jai Mundhra

3 min read 7 chapters

Detailed narrative

Strong Advances and Deposit Growth with Strategic Rebalancing

Bandhan Bank reported healthy gross advances growth of 10% YoY, reaching Rs 1.45 lakh crores as of December 31, 2025. When adjusted for the NPA sale, underlying advances growth was even higher at 12% YoY and 6% QoQ. Total deposits also grew robustly by 11% YoY to Rs 1.57 lakh crores, outpacing advances growth. The bank continued its strategic shift towards a more diversified and secured portfolio, with the secured book growing 27% YoY and now constituting 57% of total advances.

Asset Quality Improvement Driven by ARC Sale and Operational Efforts

Asset quality showed significant improvement during the quarter, largely due to the sale of NPAs and written-off accounts to ARCs. The Gross NPA ratio improved sharply to 3.3%, and the Net NPA declined to 1%. Bank-wide gross slippages decreased to Rs 1,314 crores in Q3 FY26 from Rs 1,590 crores in the preceding quarter, with EEB slippages moderating to Rs 942 crores. Early delinquency indicators also improved, with the SMA0 bucket reducing from Rs 1,582 crores to Rs 1,328 crores, signaling easing forward flows.

NIM Expansion and Cost of Funds Management

The Net Interest Margin (NIM) improved sequentially to 5.9% in Q3 FY26 from 5.8% in Q2, primarily driven by a nearly 20 basis points reduction in the cost of deposits. Management expects this positive trend to continue over the next two to three quarters, with further NIM improvement anticipated from the re-pricing of maturing term deposits. For the nine-month period, NIM remained largely stable at 6.0%.

Profitability Impacted by Gratuity Provision and Non-Interest Income Decline

Net profit for Q3 FY26 stood at Rs 206 crores, a significant decline from Rs 426 crores a year ago. This was primarily due to a one-time incremental provision of Rs 120 crores towards gratuity, following the notification of new labor codes. Additionally, non-interest income saw a 38% YoY decline, although it improved 27% QoQ. Operating expenses rose 6% sequentially to Rs 1,934 crores, mainly due to this gratuity provision.

Deposit Franchise Evolution and CASA Challenges

While total deposits grew 11% YoY, CASA deposits declined 4% YoY to Rs 42,730 crores, bringing the CASA ratio to 27% of total deposits. This softness was attributed to savings rate reductions and shifting customer behavior, a trend observed across the industry. However, retail term deposits maintained strong momentum, growing over 36% YoY, and the overall retail mix (CASA and retail term deposits) improved to 72%, indicating increased granularity and stability in the liability profile.

EEB Segment Stabilization and Product Enhancements

The EEB book, while showing an 11% YoY and 3% sequential decline (before normalization for ARC sale), is now stabilizing, with a 2% QoQ growth when normalized. The bank introduced several product enhancements in the group loan portfolio, including 18-month and 36-month tenure options and expanded repayment flexibility with bi-weekly and monthly frequency options. These changes aim to provide more choice, reduce repayment stress, and improve overall collection efficiency, which reached 98.2% for EEB in Q3.

Digital Transformation and Control Framework Strengthening

The bank made strong progress on its digital transformation agenda, enhancing its Corporate Internet Banking platform and scaling Merchant Acquiring and Payments capabilities. Key control enhancements were introduced for the EEB portfolio, including real-time SMS acknowledgements for cash collections and a real-time digital dashboard for operations executives. Pilot testing of Bluetooth-enabled portable printers was also initiated to issue instant printed receipts, further reinforcing trust and transparency.

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