Bandhan Bank's collection efficiency hit in Assam as state passes micro-finance bill

The Kolkata-headquartered lender witnessed a 10-percentage point contraction in collection efficiency between the December quarter and 1-16 January, to 78%.Bandhan Bank, a large player in the micro-finance market, has seen its collection efficiency dip in Assam days after the Bhartiya Janata Party-ruled state passed a bill to regulate micro finance lenders.The Kolkata-headquartered lender witnessed a 10-percentage point contraction in collection efficiency between the December quarter and 1-16 January, to 78%. Collection has dipped in West Bengal as well, but by a meagre 1 percentage point, showed data released by the bank on 21st January

In December, the Assam Assembly passed the Assam Micro Finance Institutions (Regulation of Money Lending) Bill, 2020. The bill, according to Emkay Research, aims to contain overleveraging of MFI borrowers and coercive collection practices by lenders, which has been causing frequent protestsKey provisions of the bill include restriction on the deployment of collection agents, coercive collection practices and door-to-door collection, collection from borrowers only at gram panchayat office or designated place suggested by the deputy commissioner, and no more than two lenders per borrower.

According to the Emkay report on 1 January, Assam has nearly 45 micro finance lenders with a portfolio of Rs12,000 crore, of which Bandhan Bank accounts for 55%, followed by Arohan Financial Services at 8%, Ujjivan Financial Services and Satin Credit care at 3% each, with the remaining being held by other small players. Assam, the report added, has seen sharp growth in the past few years, albeit on a small base and the average ticket size of loans in Assam is ₹47,263, the second-highest after West Bengal.The outstanding micro-credit in Assam is Rs6,917 crore, which is 8% of the total bank advances, Chandra Shekhar Ghosh, chief executive, Bandhan Bank, said on Thursday. Ghosh said he is also seeing demand for loans among customers in Assam.

The bank reported a net profit of Rs632.6 crore in the December quarter of FY21, a 13% decline from the same period last year, on the back of higher provisions. The lender’s provisions more than trebled on a year-on-year (y-o-y) basis to Rs1,069 crore in the third quarter. Of this, the bank said that Rs1,000 crore was on account of covid-19.Its net interest income (NII), the difference between interest earned and expended, grew 34.5% to Rs2,071.7 crore against Rs1,540.3 crore in the corresponding quarter of the previous year. Net interest margin (NIM), a key measure of profitability was at 8.3%, 40 basis points (bps) higher y-o-y.

The bank’s reported asset quality seemed to show an improvement with gross bad loan ratio at 1.11%. However, a large portion of the stress was masked by the Supreme Court’s asset classification standstill. If not for the 3 September order, Bandhan Bank’s gross non-performing asset (NPA) ratio would have touched 7.12%.Sunil Samdani, chief financial officer, Bandhan Bank explained that there are customers who have made part payments and that does not mean these are loss given default. “They make take three more months to come back and regularise," said Samdani.