Serving the underbanked, micro-financing, affordable housing: Bandhan Bank's Vision 2025

New Delhi: Bandhan Bank said it will continue expanding its geographical reach to underbanked areas, leverage its micro-financing skills and make inroads into affordable housing segment with the amalgamation of Gruh Finance as part of its strategies for the next five years amid the coronavirus crisis. Containment of the ongoing outbreak, implementation of effective financial tools, adoption of digital means and maintaining significant economic productivity may help the economy recover from the present crisis and build upon a stable financial system, Bandhan Bank said in its Annual Report for 2019-20.
As part of its strategy, Bandhan Bank has laid out its aspirations to be an "affordable financial institution by providing simple, cost-effective and innovative financial solutions", the Kolkata-headquartered private sector lender said.

Key focus areas in the next five years would be diversification of asset portfolio with modern underwriting and collection capabilities and strengthening people capabilities, including by hiring fresh talent, for growth.

Among others, the areas of focus are development of in-house technology, analytics and digital capabilities and consolidation of CASA (current account savings account) by developing deeper customer engagement, the annual report said.

"Given the huge untapped opportunity in the micro-finance industry in India, the bank in the medium term will continue to expand its current geographic reach and increase its presence in underbanked areas across the country. The bank will leverage its micro finance experience and upgrade its top-bracket micro banking customers to provide them individual loans," it said.

The bank will also utilise the skills and expertise of Gruh Finance to penetrate strongly in the affordable housing segment.

Bandhan Bank had amalgamated Gruh Finance, the affordable housing arm of HDFC Ltd, into itself in October 2019.

"The SME segment is expected to contribute highly to the growth story with rising demand from the diverse business entities in the country," it added.

Bandhan Bank said the banking industry may witness a negative impact on the portfolio quality on account of the COVID-19 crisis, leading to an increase in the gross non-performing assets (NPAs) as compared to the previous estimate.

As per the Financial Stability Report (FSR) of the RBI released in late December 2019, the gross NPA of the Indian banking industry was 9.3 per cent in September 2019, unchanged from March 2019.

Meanwhile, in its latest FSR released on Friday, RBI said gross non-performing assets of banks may jump to 12.5 per cent by the end of this fiscal under the baseline scenario, from 8.5 per cent in March 2020.

However, there are opportunities as retail lending portfolio is likely to expand further once the growth momentum recovers, Bandhan Bank said.

Commercial banking is expected to be a major engine of credit growth as penetration of formal credit improves with GST and digitisation of transactions, it said.

"Digital financial transactions are likely to exponentially grow, driven by UPI and Bharat Bill Pay. Consent based data sharing is expected to dramatically change Indian banking as banks' monopoly over customer data would go away," it added.

Nonetheless, there are threats as the COVID-19 pandemic has severely affected the global economy, it said.

"The Indian economy is also expected to undergo a difficult economic situation in the coming months despite the initiatives taken by the government and the RBI. Subdued demand and NPA issues are likely to hold back growth in corporate banking.

"Emerging cybersecurity related challenges in the financial services industry and innovative modus operandi continue to pose a threat for the banking sector," it added.

In 2019-20, Bandhan Bank reported a 55 per cent jump in net profit at Rs 3,024 crore as against Rs 1,952 crore in the preceding fiscal.

Income jumped to Rs 12,434.69 crore during the year, from Rs 7,706.42 crore in FY19.