LCapital Calls: Small is less beautiful in Indian bank loans

Kolkata-based Bandhan Bank’s (BANH.NS) earnings are a sober reminder of how volatile extending credit to the underserved can be. The fast-growing miniature moneylender turned fully-fledged bank reported a massive 80% fall in net benefit for the March quarter compared to a similar period last year. Its gross non-performing advances hit an eye-watering 6.8% – and that was after a major arrangement barely short of 16 billion rupees ($217 million), a 93% leap.


On top of pandemic torment, Bandhan has been harmed by politicians in Assam promising to postpone miniature credits; the north-eastern state accounts for 12% of its microloan portfolio which thusly makes up around 66% of its advance book. The $6.5 billion banks presently exchanges at around multiple times book esteem, a large portion of the proportion at which it opened up to the world very nearly three years prior, mirroring a generally commensurate drop in its profit from value as its awful obligation proportion quadrupled. Bandhan is probably not going to invert that until long after Covid-19 disperses.


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