NEW DELHI: Private sector lender Bandhan Bank has witnessed a series of favourable developments in the week gone by that could lower credit costs and address a key concern over the elevated stress pool in Assam, where the bank has a market share of over 55 per cent and a Rs 7,000-crore exposure.
First-up is the new regulatory regime for microfinance institutions (MFIs) that seeks to take things forward from where they have been since the Andhra crisis occurred over a decade ago.The recently-proposed regulations for MFIs assauges the concerns of Bandhan bank being subjected to the maximum number of lenders or a lending rate cap.
Secondly, the bank is bound to benefit from the Assam government’s decision to provide relief as well as incentives for MFI loans. “Bandhan Bank, with highest market share in Assam is naturally bound to benefit from the scheme designed to promote responsible repayment behaviour,” ICICI Securities analysts wrote in a note. The state proposes providing support to 90 per cent of the 26 lakh MFI borrowers through a cash grant of up to Rs 25,000.
“However, it is difficult to quantify the extent of impact as borrower indebtedness of only up to Rs 1.25 lakh is eligible and Bandhan is actively graduating borrowers from MFI to individual loans,” the analysts added. It has also been actively graduating its high vintage borrowers from group to individual loans, which rose from 1% in FY20 to 12% in FY21.