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Bandhan Bank: How Bandhan Bank plans to hold on to its title as the nation’s most profitable lender


By Pradipta Mukherjee and Suvashree Ghosh

Indian micro-financier Bandhan Bank Ltd. will diversify lending and selectively tap more rural markets to cement its position as the nation’s most profitable lender after loan repayments improved.

“There is a big demand,” founder and Chief Executive Officer Chandra Shekhar Ghosh said in a recent phone interview. “Rural India is untapped and people there are not getting credit service. Lifestyles are going to change and they also have business needs.”

Bandhan Bank, which received $1.4 billion from investors including BlackRock Inc. and Singapore’s GIC Pte in August, aims to maintain a 4% return on assets by diversifying. It plans to lend to less-risky sectors such as gold, as well as providing home and car loans. Currently the lender’s unsecured microfinance loan book stands at around 62%, Ghosh said.

Ghosh expects repayment levels to return to “normal” in the next three months after rising to about 95% from October. During the early months of lockdowns, collections had dropped to roughly 75%, he said.


The CEO is among business leaders, policy makers and politicians pinning their hopes on a strong recovery in rural India as bountiful rains have set the stage for another year of record crops. Higher disposable incomes for farmers may boost demand from automobile to cement to gold jewelry.

Despite the rise in repayments, the ongoing coronavirus pandemic could slow Bandhan’s loan growth to 20% this year, Ghosh said, from an average of more than 30% over the last three years.

Bandhan Bank, one of the country’s youngest banks, started out as a shadow lender in 2009 for poor borrowers such as tea-vendors, vegetable sellers, weavers, handicraft makers. After receiving a banking license in 2015, Bandhan was able to create a relatively low-cost deposit base with a high-yielding lending business to micro borrowers, helping its margins.

The latest capital raising took place after the central bank had restricted branch expansion by Bandhan Bank as the founding firm failed to lower its stake to the target 40% last year. It then agreed to combine with mortgage financier Gruh Finance Ltd. in a $11.7 billion deal to pare the founder’s stake, following which the regulator partially relaxed its curbs on the lender.

Some of Bandhan’s Bank profitability metrics, including return on assets and return on equity, are now the highest among Indian lenders.

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