Bandhan Bank plans to cut group microfinance loans


Bandhan Bank seeks to reduce the share of group microfinance loans to around 50% by March 2022 and to 30% of its total loan portfolio over the next four to five years.

Diversify the asset mix

The share of group loans in the bank’s total loan portfolio, which was around 81,660 crore, currently stands at almost 57%.

The bank plans to increase the share of individual loans which are usually not limited by ticket size (as in the case of group loans) to around 20-30% (of its total loan portfolio), from 10%. currently as part of its strategy to diversify its asset mix.

Collective to individual credits

According to Chandra Shekhar Ghosh, managing director and CEO of Bandhan Bank, the bank is in the process of turning some of its borrowers from group loans to individual loans. The bank chooses some of its existing borrowers under a group lending model who are doing well and generating “good income”. It also checks credit quality using data from credit bureaus before turning the customer into an individual borrower.

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“We developed this product (from group loan to individual loan) about two years ago and we tested the system and the processes. It experienced very good growth of around 155% year-on-year. Individual loans represent about 14% of our total microcredit portfolio and in the future we are looking to diversify group loans into individual loans, ”said Ghosh. Activity area.

Save time

Although there is not much difference in terms of the interest paid by the two groups of borrowers, individual lenders are generally not required to attend group meetings which are held on a weekly or bi-monthly basis. , which saves time. Staff can use the time to develop other businesses.

Also, unlike group loans where there is a cap on the amount that can be paid to a particular group (by a set of lenders), in individual loans this is not the case and the bank can grant a loan depending on the viability of the business model, said Ghosh. In addition, the bank would also be free to sell these customers other products, including home loans, consumer loans, etc., thereby generating more business in the future.

Vision 2025

The bank, which unveiled its Vision 2025 last year and set a roadmap for diversification, expects the plan to be pushed back a few months due to the Covid-induced slowdown and its impact on businesses .

As of September 30, 2021, his total advances amounted to 81,660 crore. Of this total, group microcredit (EEB Group) represented around 57%, individual loans (EEB Individual) around 10%, commerce 8%, housing 24% and retail 1%.

See also: RBI approves Bandhan Bank as “agency bank” to run government business

In Vision 2025, the share of collective loans should drop to 30%; individual and business loans together are expected to account for about 30 percent; housing would be 30 per cent more and the share of retail trade would rise to 10 per cent.

“Our Vision 2025 plans could be delayed for a year because of this Covid…. we should have a clearer picture next year and we would be able to revise our plan accordingly, ”Ghosh said.

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