Stress In MFI Space To Persist In H1, Says Bandhan Bank MD

Bandhan Bank expects the stress in the microfinance institution space to continue in the first half of the current financial year, which will have an impact on its net interest margins, Managing Director and Chief Executive Officer Partha Pratim Sengupta told NDTV Profit in an interview.

In order to cut its losses from the MFI space, the bank has been shifting its asset base from unsecured to secured book. Given that the MFI loan book yields higher margins, Sengupta expects NIM of the bank to fall in the first two quarters. However, he expect some stabilisation from the December quarter.

"Our secured book which was 42% at the end of FY24, is now at 50.5% in FY25. As the secured book increases, there will be some moderation in NIMs lower than the current level of 6.7%," Sengupta said.

He also expects slippages to decelerate further but continues to see stress in the June and September quarters. Some normalisation in slippages is predicted from the third quarter and it will be in the range of 1.5-2.0%, he said.

For the quarter ended March, the Kolkata based bank's slippages were Rs 1,750 crore as against Rs 1,620 crore a quarter ago and Rs 1,020 crore a year ago. The bank's NIM was 6.7% in the March quarter against 6.9% a quarter ago.

Further, with rationalisation of cost of funds and deposit rates, Sengupta said that the bank will continue to grow in the other sectors such as retail and housing loans.

"Considering all these factors, we believe that the rate cut will have an impact but not to that extent. Almost 40% of our loan book may get impacted in Q1 and Q2 but from Q3 onwards we will get the normalisation of rationalisation of deposits," he said.

This is because the bank can make up for losses in the December quarter as 55% of its loan book is fixed, 5% is linked to marginal cost of lending rates and 40% is with external benchmark lending rate.

Moreover, given the volume of business will increase, the bank is also looking to boost its other income through various other services that it is planning to introduce, he said.

For the quarter ended March, a fall in provisions lifted Bandhan Bank's standalone net profit to a nearly sixfold jump to Rs 317 crore.

The provisions (other than tax) and contingencies were lower by 29% at Rs 1,260 crore compared to Rs 1,774 crore in the March quarter of FY24.