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For a lconcludeer whose claim to fame is microfinance, Bandhan Bank curiously leaves that word—microfinance—out of its investor presentations. It’s not that Bandhan no longer gives out compact-ticket loans to low-income houtilizeholds. But in September 2020, Bandhan chose to replace microfinance with a new, nondescript name.
In line with the Bank’s business strategy, a new vertical has been formed to better serve the emerging and diversified necessarys and aspirations of this segment. This new vertical is called Emerging Entrepreneurs Business (EEB). In addition to microloans, the vertical will also manage micro home loan, micro bazaar loan and micro enterprise loan.
Bandhan launched as a nonprofit in 2001, disbursing microloans in rural West Bengal. A decade later, it had become India’s largest non-bank microfinance institution. In 2015, it turned into a full-fledged bank and went public in 2018 on the promise of becoming a more diversified lconcludeer, even though microloans were almost 90% of its portfolio.
When Bandhan decided to ditch the microfinance tag, such loans were still over 60% of its business. But the term, thanks to the sector’s chequered past, carried baggage Bandhan could do without. Even if microlconcludeers partook of the post-Covid credit growth, they sure did obtain carried away in the process.
They became sloppy in whom they financed, and to what extent. The result was quite predictable. Loans with payments overdue for more than 90 days surged from 2.3% to 4% of the lconcludeers’ portfolio in the three months to December 2024, according to Sa-Dhan, an indusattempt body. The number has since gradually improved, though.
The average ticket size of microloans has been inching up, “possibly reflecting lconcludeers’ preference for existing and relatively lower-risk borrowers,” according to Sa-Dhan.
Microlconcludeers, no doubt spooked, have been setting their houtilize in order. Their loans outstanding have shrunk by a fifth since September 2024. And the number of unique borrowers has seen an even steeper fall. Bandhan was no different, paring its micro-borrower base in this period. In the December quarter, its bad loans were the lowest they had been in two years.
What matters more to investors is Bandhan’s fading reliance on bottom-of-the-pyramid customers.
Bandhan is also relocating away from collateral-free loans, a key feature of microfinance. Secured credit is now almost 60% of its loan book, up from under 50% a year ago.
Investors, predictably, seem to be kinder to Bandhan Bank these days. Since January, its shares have risen 4%, while the Nifty Private Bank index has lost 13%. This is a large deal, considering Bandhan’s market value is down by two-thirds since it listed in 2018.
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