Banking News

Bandhan Bank seeks buyer for its Rs 775-crore distressed affordable home loan portfolio


Bandhan Bank has invited offers for its Rs 775-crore distressed affordable housing loan portfolio, likely an indicator of the emerging stress among the lower-income group, said people with knowledge of the offers.

The private lender’s portfolio comprises 8,529 accounts given to affordable home buyers with average principal loans ranging between Rs 10 lakhs and 12 lakhs. The bank invited offers in cash by December 2, the people cited above said.

Bandhan Bank did not respond to ET’s request for comments.

The sale of an affordable home loan portfolio by Bandhan Bank also resonates with the concerns expressed by the Reserve Bank of India’s (RBI) growth of unsecured loans, which prompted the regulator to raise the risk weightings on such loans last month.

“The rising delinquencies are partly because small ticket loans are given without the lender undertaking proper due diligence of the borrower. Therefore, someone with less ability to repay the loan is often granted one,” Madan Sabnavis, chief economist, Bank of Baroda, told ET. “To add to this, rising inflation is eating into borrowers’ income, but the borrower is not willing to sacrifice on consumption even if s/he doesn’t have the ability to pay.”

Delinquencies in the affordable home loan segment show stress at the bottom of the pyramid since this income group is the most vulnerable to the risk of job loss and inflation, said a bank official.The Bandhan Bank portfolio on sale is part of Rs 16,663 crore loan book it acquired from Gruh Finance. In 2019, Bandhan Bank acquired Gruh Finance from HDFC Ltd.A study by TransUnion Cibil released early this month showed a rise in defaults in the small ticket loans- below Rs 50,000.

Delinquencies in small ticket loans rose to 5.4% as of September 2023 as against 4.2% in September 2022, the report said.

It said that the share of small-ticket loans rose to 8% in June 2023 from 3% in June 2019. Since January 2022, small-ticket personal loans of less than Rs 50,000 have accounted for approximately 25% of new loan sanctions in terms of numbers, the data showed.

The TransUnion Cibil study on restructured accounts showed that 2.7 lakh credit accounts were tagged as restructured due to Covid 2019 for the micro, small and medium enterprises (MSME) loans segment. Micro and small entities constitute 76% of the restructured accounts compared to larger-sized MSME entities.


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