The agency downgraded the rating on NCDs worth ₹1,295 crore to AA-/Stable from AA-. It, however, has withdrawn the rating on ₹265 crore of NCDs as it has been repaid, the statement said.

Bandhan Bank’s managing director Chandrashekhar Ghosh clarified to Mint that these NCDs were issued by the erstwhile Gruh Finance, which later got merged with the bank four years ago. He also added that while the rating has been downgraded, the outlook has been upgraded to stable.

“Despite momentary correction in fourth quarter of fiscal 2023, the bank’s asset quality metrics have remained volatile since the pandemic outbreak, thereby constraining its overall profitability. Amidst legacy asset quality issues pertaining to the pre-covid-19 portfolio and slow restoration in ground level credit discipline in the core territory, the bank’s ability to revise its growth strategy and business model to tap the market potential remains critical,” it said.

Bandhan Bank has cumulatively written off ₹11,354 crore over fiscal years 2021 to 2023. The bank’s asset quality has been impacted due to the ground level challenges in West Bengal, Manipur and Assam. 

“While the bank has made attempts to reduce its exposure to these regions, this geographical belt accounts for more than 50% of its asset base. Ability to diversify and de-risk operations from such regional disturbances and increasing competition will be a key monitorable,” said the rating agency.

The bank’s gross and net non-performing assets increased to 7.3% and 2.3%, respectively, as on 30 September 2023, from 4.9% and 1.2%, respectively, as on 31 March 2023. This deterioration in asset quality was due to fresh slippages and reclassification of ECLGS loans as NPA during the period.  

“In December 2022, the bank had received ₹917 crore as reimbursement under credit guarantee fund for micro units (CGFMU) scheme and, was expected to receive another ₹1,700 crore as recovery in the near term. However, the recovery has been delayed due to ongoing procedural formalities. The quantum and timeline of reimbursement through this credit guarantee scheme will remain a monitorable,” the statement added.

According to Ghosh, the asset quality will improve over the next two quarters and the rating will be revised following this. “We are expecting credit cost of 2% by the end of this year. We are not looking to raise capital as our capital adequacy ratio is 19%,” added Ghosh.

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Published: 18 Dec 2023, 04:21 PM IST