In a major breakthrough, after the Assam government signed an agreement with microfinance institutions (MFIs) to regularise and repay the entire loans of highly stressed borrowers, the shares of Bandhan Bank on Monday surged 7.74 percent on BSE and 7 per cent on NSE in early trade and intra-day trade respectively.
"Private sector lender Bandhan Bank, with the highest market share in Assam of over 55% and a ₹7,000 crore exposure, is naturally bound to benefit from the scheme designed in a way to retain credit culture and promote responsible repayment behaviour," an ICICI Securities report stated on Monday.
"However, it is difficult to quantify the extent of impact as borrower indebtedness of only up to ₹125,000 is eligible and Bandhan is actively graduating borrower from MFI to individual loans," the report added.
In the January-March quarter (Q4FY21), Bandhan Bank's asset quality witnessed significant deterioration with pro-forma Q4 slippages/ write-offs at 11 per cent/10 per cent (annualised), leading to >200bps decline in net interest margin (NIM), the report said.
Meanwhile, as promised Assam government has stuck to its poll promise and earlier this month decided to providing relief as well as incentives for MFI loans.
"Assam, in particular, has witnessed huge stress build-up for the entire MFI industry," the report stated.
Further, the report said that the proposed announcement is a win-win for lenders as well as borrowers.
The nuances and conditionalities attached will help retain the credit culture and promote responsible lending, borrowing, and repayment behaviour, it said.
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