Bandhan Bank, small finance banks see higher slippages as microfinance lending persists
Bandhan Bank and a host of small finance banks that have transitioned from microfinance business to their current avatar have faced higher slippages during the second quarter from their legacy business.
Their desperate efforts to slow down micro-ticket lending to the bottom of the pyramid customers and instead raising the share of the secured portfolio did not prevent the rising credit cost. Microfinance loans are unsecured as these are not backed by collateral.
A close look at their second quarter numbers showed that 75-80% of the fresh slippages of loans into the non-performing category are on account of the microfinance business for many of these lenders.
Bandhan Bank, for example saw a fresh slippage of Rs 1,115 crore in the second quarter with Rs 752 crore, ie about two-third, coming from the microfinance portfolio. Slippages for the quarter were higher against the preceding quarter's Rs 890 crore due to the stress in the microfinance sector.
Bandhan's gross non-performing assets deteriorated to 4.68% at the end of September from 4.23% three months prior to that.
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