Bandhan Bank expects a reduction in stressed assets over the next two quarters with borrowers regularising payments along with improving collection efficiency and credit demand.

The bank’s gross non-performing assets (GNPA) as a portion of advances for the quarter ended December 31, 2021, was at 10.81 per cent and showed no increase from 10.82 per cent for the quarter ended September 31, 2021.

The net non-performing asset ratio was at 3.01 per cent for the quarter ended December 31, 2021, compared with 3.04 per cent for the quarter ended September 31, 2021.

The bank’s managing director and CEO Chandra Shekhar Ghosh said the share of customers regularising their payments during the quarter has improved with the bank recording 89 per cent of its microfinance customers as full paying in December 2021 compared with 84 per cent in September.

Moreover, nearly two-thirds of the accounts restructured by the bank have been paying customers during the quarter.

“In Assam, there is a significant improvement in collection efficiency from 82 per cent in September to 96 per cent in December. In Bengal there is an improvement from 92 per cent in September to 97 per cent in December,” said Ghosh.

Ghosh told The Telegraph that the customer queries on loans have started to come in and borrowers are keen to maintain a healthy credit record which in turn is reflected in the improved collection efficiency.

“It is encouraging to note that after a challenging last two quarters, we have been able to arrest the increase in GNPA. Many of our customers have nearly regularised their overdue accounts. It is only a matter of time that the customers regularise their accounts fully after which we are likely to see a significant drop in GNPA in the next couple of quarters,” he said.

Market analysts also expect that the peak in NPA ratios has been reached but remain watchful on the impact of the bank’s plan to lower the share of group loans in the microfinance segment.

“With limited impact arising out of the current wave of Covid, we should see valuation expansion to come through. The near-term key concern would remain on the diversification strategy given that the bank has been focused primarily on MFI lending in the past as the characteristics of individual loans tend to be different compared to group loans which require greater monitoring or risk management,” said Kotak Institutional Equities.