It is transitioning from a Bengal based MFI to a pan India bank:
Bandhan Bank has transitioned well from a micro-finance institution to a bank after commencing banking operations in August 2015. Brokerage firm Religare has come up with some interesting insights on this unlisted Kolkata-based bank based on its annual report.
Up to March 2016, it had garnered Rs121 billion of deposits. Out of these, current and savings account (CASA) deposits stand at Rs26 billion. Banks accounted for around 35% of its total deposits. Bandhan Bank has a stellar savings account (SA) deposit ratio of 20%. It has issued 77 lakh debit cards up to now.
On the flip side, there is a concentration risk with respect to deposits as the top 20 depositors constituted 30% of the total deposits. Another problem for the bank is that the savings account balance per account is low. After doing some number-crunching, Religare estimates that the average balance per savings account for the bank is at a little more than Rs3,000. This low ratio impacts profitability as the operating costs of these accounts is high in comparison to the income generated.
Coming to the loan book, agriculture and allied loans constitute more than half of its total loans. Currently, its small and medium enterprises (SME) loans stand at Rs65 crore. These constitute merely 0.5% of the total loans. It intends to focus on SME loans with a ticket size of Rs1 lakh– Rs10 lakh and retail loans. Its retail loans stand at Rs60 crore i.e. 0.5% of the total loans.
Its return on equity (RoE) stands at a around 17% on an annualised basis, while its return on assets (RoA) is at 3.8%. Currently, around 1/3rd of its total branches are situated in urban regions. Its future plans include opening of 180 new branches by March 2017. The majority of its new branches will be opened outside West Bengal. The management plans to brand the bank as a pan-India bank.
The bank is experimenting with low-cost small format branches in parts of West Bengal and Bihar in order to reduce operational costs. These branches will have minimal staff and will largely restrict themselves to deposit-taking and withdrawal of money.
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