Private sector lender Bandhan Bank is confident that it will receive the claims made under two credit guarantee schemes, interim MD & CEO Ratan Kesh told businessline.
“We believe that we have been able to explain some of the processes that is evolving and some limitations that bank had to face during Covid-19 period, and that there was no specific lacuna or intent issues. We are confident of receiving the claims,” he said.
The private lender had taken insurance cover under the Credit Guarantee Funds for Micro Unit (CGFMU) scheme against ₹20,800 crore of microfinance (MFI) loans disbursed in FY21. It had separately disbursed ₹1,950 crore of loans under the Emergency Credit Line Guarantee Scheme (ECLGS) in FY21 and sought cover for the same.
Subsequently, the bank claimed and received an amount of ₹917 crore from the National Credit Guarantee Trustee Company (NCGTC) in December, 2022. It made another additional claim of ₹1,290 crore in the second quarter of FY24 but the payment is subject to the result of the audit which is being conducted by EY.
The total claimed amount so far is much lower than the maximum eligible amount, which is 15 per cent of the total amount involved, the bank’s management says.
Furthermore, Kesh said that the bank is on track to send permanent candidate names for MD, CEO position to the Reserve Bank of India (RBI).
“It is very much on track. A search committee, an external committee and the board is working on finding the right candidates. The RBI has given us 3 months to complete the whole process of succession, we should be able to meet the deadline,” he said.
Business updates
Kesh said the bank will follow a deposit led credit growth strategy going ahead. In Q1, overall deposit of the bank rose 23% year-on-year (y-o-y) to ₹1.33 trillion, whereas total advances were up 22% y-o-y at ₹1.25 trillion.
With transformation completed to a new core banking system, Kesh says the bank now has an ability to launch many more current account products. CMS, trade, forex services, escrow account and more merchant acquiring products are in the pipeline which will give the bank low-cost deposits. On savings side, a significant portion of the bank’s customers keep money with the lender due to attractive rates, Kesh said.
As primary bank
Accordingly, to make Bandhan Bank the primary bank to the customer, it will launch products such as affluent banking, specific products for NRIs, women, and even credit cards going ahead. The bank’s 530 new branches will start delivering deposits for the lender, he said.
Overall, the bank’s credit-deposit ratio would be closer to 94 per cent-95 per cent by FY25 end and near 90% by FY26, Kesh said.
“We will continue to diversify into secured and unsecured loans both and diversify our business geographically. Currently NIM (net interest margin) is at 7.6 per cent and we are confident of maintaining it at 7-7.5 per cent, depending on cost of deposits,” he said, adding that the RBI’s new liquidity coverage ratio draft guidelines, if implemented fully, could have a 6-10 per cent impact on the bank’s LCR position, which was around 150 per cent as on Q1 end.
The bank is aiming to lower its gross and net non-performing asset ratio (GNPA, NNPA) to 3.5% and sub 1% by FY25 end from 4.2% and 1.1% in Q1FY25, respectively. It will aim to achieve 1.8%-2% credit cost in FY25.