Net new EEB customer accretion has been hovering at the same level for 2-3 years; is there still a penetration story or is the market saturated, and where do you see microfinance industry growth coming from?
New borrower additions are stagnated due to higher industry-level rejections from delinquency, with around 23-24% of industry customers ineligible for loans. The Bank still adds 1.3-1.4 lakh customers monthly and 3.5-4 lakh per quarter. Renewal of long-tenure good customers using analytics is performing well, and new customer growth will pick up once industry leverage issues stabilize over 1-2 quarters.
Can you quantify MFI slippages this quarter and explain why the situation did not improve like other banks (which saw 20-40% decline in slippages), is this a geography-specific issue?
EEB gross slippages were Rs. 1,118 crore (Rs. 984 crore net), marginally up from Rs. 1,089 crore. The Bank already had Bandhan Plus 2 at ~90% with overleveraging at only 10% (improved to 9.5%), versus industry which was ~19% a year ago, so industry has more headroom for percentage improvements. Bandhan's delinquencies (180+ at 7% vs industry 15.26%; 90-180dpd at 2.08% vs 3.27%) are far superior, and recovery should come through Q3 onwards.
For H2 we were banking on higher MFI growth and asset quality improvement, but West Bengal and Assam elections are due in Q4 next year; what has been the historical disbursement and asset quality trend in past election cycles?
Five years back during West Bengal elections, portfolio quality was much better with no issues. There is no political party in West Bengal currently campaigning on labor or waiver issues. Microfinance H2 is historically far superior to H1 in disbursement, growth, and book quality, so Q3-Q4 should show better trends.
Branch addition has been particularly slow in the last few quarters; are you going to significantly accelerate branch expansion to support future growth?
There is an existing branch expansion plan being executed; the focus is more on digital strength capability rather than aggressive branch expansion. Geographies of low presence such as the south and partly north will be prioritized, with much lesser focus on the east.
With ECL implementation upcoming, what is your overall SMA pool including non-EEB for SMA 0/1/2 categories?
Assessment of new ECL guidelines is still under process, so full IndAS-based SMA figures are not available. Current DPD-based EEB SMA 1/2 details are already in the investor deck. The Bank will engage subsequently to share IndGAAP non-EEB SMA figures.
Where do you expect full year and next year credit costs to settle, where will SMA-0 settle in Q3 given holiday impact, how do you strengthen PPoP margin given thin coverage of credit costs, and what is the impact of Bihar election manifesto debt waiver talk on MFI?
Credit cost guidance over 2-3 years remains around 2.5%; Rajeev clarified by FY27 exit, EEB credit cost stable-state 2.5-3% and overall Bank 1.5-1.6%. SMA-0 holiday impact is being recovered (Rs. 350 crore already in October). PPoP margin will improve as cost of funds reduction flows through largely from Q4, with steps on other income and treasury also being taken. On Bihar, recovery has been good for Bandhan Bank, and most political parties have realized debt waivers are not a permanent solution.
How much did you cut your MCLR by since April, and has anyone cut MCLR so sharply or are you higher than peers?
MCLR was cut by roughly 200 basis points. The Bank had an MCLR of almost 11.5% versus the next peer at 9.5-9.7%, so it was an outlier. The recalculation aligned the methodology with the market by removing service charges recovered from customers from cost of funds. This impacted almost Rs. 5,000 crore of housing loans.
On Bihar microfinance, has MFIN stepped in or have large lenders made representations or issued guidelines so field agents can work without hindrance and customers know they need to service loans?
Bandhan Bank's Bihar delinquency is much better than industry (30dpd 3.8% vs industry 5.14%; 90+ at 2.04% vs 3.0%; 180+ at 6.84% vs 12.54%). MFIN has issued a one-pager guideline to all relationship officers to communicate during weekly meetings that waivers are unsustainable. Pre-emptive steps have been taken with MFIN coordination, and customer noise on debt waiver expectations has been minimal.
Given EEB disbursements have gone up but stress continues in some states, in which geographies have you been comfortable lending?
Eastern parts including West Bengal, Assam, and Bihar continue to be strength areas where growth is coming, supported by 12-18 month renewal cycles for existing customers. Some traction is appearing in Odisha and Madhya Pradesh, though smaller scale. Tamil Nadu and Karnataka are restricted due to guardrails as late entrants. Disbursals in Q2 have returned almost to Q2FY25 levels, with September crossing Rs. 5,000 crore.
Sequentially, housing NPA has moved up despite strong growth, is this because of holidays or something else?
Some of the housing NPA increase reflects ballooning-related NPA recognition assessed quarterly and certain underlying portfolio in the affordable segment. The Bank is taking action to ensure recovery comes through, and on a net basis after recovery, credit cost is commensurate with industry. Slippages in housing went to 2.4% with recovery around 15%, leaving NPA-to-advances at 2.8% for the quarter.
Within EEB, the Bandhan plus more than three lenders portion has been stable for the past few quarters, are you finding it difficult to run down the portfolio?
Guardrails for the three-lender norm were put in place on April 2nd FY26, so it has been six months. Two more quarters are needed; the three-lender plus has come down 100bps from 11% to 9.5% in two quarters. By March 2026 the figure should drop to 6-7%, and below 5% by Q1FY27 as 12-18 month loans mature.
Why is cost of funds not yet showing improvement quarter-on-quarter despite CASA ratio up and savings rate cuts, and how to think about NIMs going into H2 and next year given the prior 70-80bps mix-shift drag?
Savings cost has dropped by ~200bps (5.5% to 4.2%, with September at ~4%), but ~Rs. 75,000 crore of retail term and bulk deposits will only reprice on renewal, with major impact in Q4 and small impact in Q3. NIM guidance remains around 6%; H1 is 6.1%. Q2 NIM of 5.8% is expected to be the bottom point this fiscal year, with EEB growth from Q3 onwards helping margins recover.
On business mix, secured is at 55% and microfinance including individual loans is at 36-37%; how to think about mix going forward into FY27 and has microfinance bottomed out?
Secured mix could increase further by 2-3 percentage points, moving towards 57-58% over the next 6-7 quarters. The Bank is also trying to arrest the EEB degrowth to enable moderate growth there, so the mix could move within these ranges. If microfinance grows, non-microfinance will grow at a much higher rate, maintaining or slightly dipping the ratio.
Was the 200bps MCLR cut something to do with RBI telling you, or basically your own decision?
The MCLR cut had nothing to do with RBI. It was a calibrated correction to align the calculation with peer methodology, since the Bank's MCLR was an outlier at 11.5% versus 9.5-9.7% for the next bank in line.
Will there be any further shocks from RBI in terms of PSL classification or supervisory comments?
Nothing as such has been received in the supervisory report. Major regulatory issues have already been addressed and technology-dependent items are in process; no shocks are expected on PSL classification or otherwise.
On Bihar opposition manifesto talk of waivers, is there any difficulty in approaching customers for collections given upcoming elections?
There has been no material change in collections as of today; customer visits and center meetings are happening normally. The Bank is keeping a close watch but elections triggering waiver talk is a recurring pattern that typically settles down without disrupting operations.
On the Rs. 650 crore of SMA-0 from bunched-up holidays, you have only managed to recover Rs. 350 crore; ideally it should have been more, is that the understanding?
Of the EEB portfolio, 92-93% is collected on holiday demand days and 7-8% flows to subsequent weekly cycles, totaling Rs. 650 crore principal that moves to 1-15 DPD; this gets collected gradually over subsequent weekly cycles. October had three Monday holidays, so the recovery is taking 1-2 weeks more than usual. From the current Rs. 1,500 crore SMA-0 reported, it has already come down to ~Rs. 1,200 crore over 3-4 days, and will normalize to below Rs. 1,000 crore by November-December.
Wholesale banking GNPA went from Rs. 730 crore to Rs. 870 crore quarter-on-quarter, what is the reason and is this LAP or business banking?
Wholesale banking GNPA ex-ABG is quite low at 0.5-0.8%; ABG has higher NPA primarily because the book has been degrowing, creating a denominator effect. ABG is unsecured business banking (not LAP), and the team is focused on improving collections within the underlying risk areas.
Are you seeing stress in Madhya Pradesh, Bihar, and Maharashtra MFI, where some other players are facing collection difficulty?
Bihar is doing reasonably well; Tamil Nadu and Karnataka are a little stressed; Maharashtra is doing reasonably okay. Gujarat is being watched more qualitatively as it is a slight cause of concern versus industry trends, but exposure is small. Maharashtra is holding for the Bank in line with prior periods.
Have you taken any price hikes in group loan?
No price hike has been taken in the group loan portfolio. There is no plan to hike rates in MFI.
Different MFI players have inched up yields by 75-100bps using risk-based pricing; do you see a need to raise yields for JLG/MFI loans?
The Bank is not looking at risk-based pricing for group loans because the group concept is cohesive and difficult to differentiate at the borrower level. The Bank prefers to maintain a flat rate at the group level focused on quality book. Rural markets are sensitive to differential pricing, and customer risk profiles within a group are very similar.