Bandhan Bank: Chandra Shekhar Ghosh explains Bandhan Bank’s extra provisioning, opex issues and sees credit cost @1.5-1.8% next FY

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, says last financial year the bank had opened 300 branches and for that recruited 2,000 people. That cost is showing in the book but they had not given the full business of last year. Their business will be forwarded to this financial year and next and onward. That is why Ghosh feels that it is an investment and not a cost but account-wise, it has been booked as a cost. Ghosh further says that the slippage and DPD have also come down which is a good sign. Also the collection efficiency has come to 99%.

Your net profit has taken a dip due to extra provisioning. What is the reason for providing around Rs 1,700 crore in this quarter?
Chandra Shekhar Ghosh: This quarter, we had written off Rs 3,852 crore and there is a very old portfolio in our book and for more than two years, we are carrying this book as NPA. We can make one time 100% provision. Now it is 81%. We are likely to make it 100% and keep it separately recovered from this customer. This is a technical write off which helped the bank to grow in the future and is a good portfolio.Have you heard back from the National Credit Guarantee Trustee Company regarding the audit which was conducted and how close are you in terms of a resolution?
Chandra Shekhar Ghosh: A CGFMU portfolio audit is going on and we know that there are 30 lakh customers and they are doing it in a very good way. This is in the very last moment now. We have the best confidence in that system process and the quality of the disbursement is very good on this portfolio. We are hopeful that within a short time, this decision will come and we will like to close it.

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Your operating expense has gone up by 32% in Q4. Any specific reason for that?
Chandra Shekhar Ghosh: Last financial year we had opened 300 branches and for that we had invested in 2,000 people. They have been recruited and that cost has come but they had not given the full business of last year. Their business will be forwarded to this financial year and next and onward. That is why I am feeling that it is an investment and not a cost but account-wise, it has been booked as a cost. Second, these 300 branches also meant infrastructure development and some of the depreciation is covered in that. That is on one side. On the other side also, the cost of people is also there. The microcredit book has been under stress and this portfolio is recovered by the separate vertical which is called the recovery vertical. We recruited 300 people for this recovery vertical last year and their cost also has come in here. That cost is a little bit high, but that it is an investment and short term is showing as a cost and next year we will benefit from that and we will also like to minimise and the cost to income ratio for that reason has been a little bit higher.

How do you see your cost to income going forward?
Chandra Shekhar Ghosh: Our slippage has come down. From the last financial year March was in slippage 5.6% which has now come to 2%. In that sense, it is also showing that the slippage has come down which means my income will increase.

When the income increases and costs are likely to minimise, automatically my cost to income ratio will be stable. We will try to maximise the cost to income ratio.

How much of your credit guarantee fund for micro units portfolio have you provided for this quarter? Is there any provisioning remaining?
Chandra Shekhar Ghosh: The CGFMU portfolio is of Rs 3052 crore and this portfolio includes non CGFMU constituents also. So, totally Rs 3,852 crore have been written off. This Rs 3,052 crore had 89% provision and there was another 11% extra provision in this quarter. Accordingly, it has gone to this writeoff technically. In that sense, it has just been removed from the balance sheet and made to separately recover that money. What is the outlook on your net interest margins? Will there be pressure here?
Chandra Shekhar Ghosh: The net interest margin in the bank is now 7.3% overall in the year. Last year, it was 7.2%. I feel that because slippage has come down, it means the quality of the portfolio is increasing and that will help us to become a good income in the bank. But on the other hand, the deposit rate will be impacted if there is a further increase in the cost of funds. All together, we are now at 7.3%. I feel 7% plus or minus 20 basis points can be our guide to the market to maintain.

Fresh slippages have reduced this quarter. What is the guidance on asset quality and credit cost?
Chandra Shekhar Ghosh: The slippage has come down. DPD has also come down which is a good sign. The third point is that the collection efficiency has come to 99%.

Another point is that the quality of our unsecured loan portfolio is improving. We disbursed Rs 65,000 crore in FY23-24; out of that, only Rs 160 crore is NPA and that is showing us that in future, the portfolio quality is good and slippage will come down further. The credit cost in the next financial year will come to 1.5-1.8%.

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