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We’ll try to reduce promoter stake through OFS: Chandra Shekhar Ghosh, Bandhan Bank

"We have opened 73 micro-credit offices, with just two tables and chairs providing banking services."

, ET Bureau|
Last Updated: May 03, 2019, 07.57 AM IST
Chandra Shekhar Ghosh-1200
Bandhan Bank reported a 68% year-on-year rise in net profit in the quarter ended March 2019. In a post results interview with Joel Rebello, CEO Chandra Shekhar Ghosh talked about the bank’s performance, outlook on asset quality and his plans to reduce promoter stake in the bank in line with RBI directions.

Edited excerpts:

What drove profitability in this quarter?

The bank has performed well after facing some turbulence because of rising NPAs last year. The scenario has changed in the last two quarters. Our repayments are coming at 99.30% which means it will positively impact our balance sheet. Our liabilities are also growing very well, especially from the central region which grew 45% and 42% from the western region which is higher than the 39% seen from the eastern region, which means people have accepted the bank as a pan-India bank. It means that customers trust our bank. Our CASA has also improved, which has helped us reduce our cost of funds. All these have helped our profits. In the past three-and-a-half years, we have set up the bank, now it is normal course of business. We are now confident of the future.

What is the outlook on asset quality?

If we compared the third quarter to the fourth, our gross NPA, excluding IL&FS has come down to 1.08% from 1.30% in December which is a positive movement. Our on-time repayment is 99.30%, which means that our NPAs will automatically be below 1%. The trend is downwards and whatever we have seen in terms of repayment, we expect this year to be better in terms of asset quality.

What is the update on the acquisition of Gruh Finance? Can you give us a timeline for the completion?

So far, the approvals have come from all the regulators very smoothly; only NCLT’s approval is left and we don’t know when it will come. Gruh has called a meeting of shareholders and lenders on June 3 and we have also called a meeting to decide the shareholders meeting on May 3. So, things are moving in the right direction. If the regulators have given a go-ahead, then other approvals will come automatically. It should come sooner, rather than later.

Your holding company has to also reduce stake in the bank. How do you plan to achieve that?

The first objective for the bank is to be in compliance with the RBI. Many factors will decide how long we will take to reduce stake. We are trying to do it quickly. Option on the table is only an offer for sale (OFS), because we are not going for another acquisition. We can not share the timeline because a lot of things are involved, but we are committed to be in compliance with the RBI.

How do you see the lending book panning out?

Micro loans constitute 86% of the book. What we’ve seen is that demand is increasing and micro borrowers are consolidating towards one organisation because of which we have seen high growth. Our borrowers’ dropout rate is currently 9%, down from 12% a year ago. Retention rate has increased, which means the amount of business will be good as old customers take a higher valued loans. Around 20% of my new borrowers increased in micro credit last year. Our average loan size has increased 14%. Also, when the Gruh merger is completed, the opportunities of scale will come in. Even if each of our 1,000 branches sends a proposal to Gruh every month with even a ?10 lakh average, it will help us a lot. We are developing the systems and processes to set up.

You are also consolidating branches. What is the plan in terms of network?

In the last three-and-a-half years, I have focussed on deposits. I now strongly feel that liabilities are not an issue. This year, we have not taken bulk deposits. The issue is to grow the advances book which will mainly include micro and affordable housing. Others will include gold loans and SME financing. We opened 500 branches in the first year and then 150 branches. We now have a good number of branches. If we need to open branches in an area where we do not have branches, then we will open. We have opened 73 micro-credit offices, with just two tables and chairs providing banking services to non-micro credit customers. We got deposits and CASA. So, the market is there. Infrastructure need not be big; we need only simple transactions of deposits, withdrawals, fixed deposits, remittances and insurance. The market is huge in India and I am not feeling any discomfort on the number of branches.

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