Bandhan Bank making structural changes to revamp underwriting in microloans segment

Following ongoing high levels of slippages, Bandhan Bank is implementing structural changes to overhaul its underwriting approach for microloans under its Emerging Entrepreneur Business (EEB) segment, aiming to strengthen risk controls.

The private lender is transitioning to a standardized, rules-based credit framework with independent governance protocols to enhance risk management in EEB lending operations.

“We’re fundamentally transforming our underwriting methodology. First, we’re shifting from decentralized local assessments to a centralized decision-making model. By embedding business rules into our systems, we’re minimizing discretionary judgment to ensure appropriate loan amounts and products for each borrower,” stated Bandhan Bank Managing Director and CEO Partha Pratim Sengupta during the Q3 FY26 results discussion.

Persistent asset quality concerns in the EEB portfolio drove fresh slippages of ₹1,314 crore during the December quarter, following ₹1,234 crore in Q1 and ₹1,590 crore in Q2 of FY26.

“Our priority remains reducing portfolio stress, particularly the Days Past Due (DPD) accounts, to minimize future slippages. Quarterly slippages already decreased by ₹280 crore sequentially. Maintaining this trend should deliver a stabilized portfolio within 12-24 months,” Sengupta added.

Quarterly credit costs improved to 3.3% from 4.1% year-on-year, with management reaffirming their target of reducing EEB credit costs to 2.5% and achieving overall credit costs of 1.6-1.7% by FY27-end.

The bank accelerated stress resolution in Q3 through the sale of ₹6,800+ crore in distressed assets to Asset Reconstruction Company (India) Ltd (ARCIL) and Phoenix ARC.

This contributed to improved asset quality metrics, with Gross NPA ratio declining to 3.33% (vs. 4.68% YoY) and Net NPA ratio at 0.99% (vs. 1.28% in Q3 FY25).

Bandhan Bank’s Q3 FY26 net profit declined 51.8% YoY to ₹205.6 crore, pressured by a 37.9% YoY drop in non-interest income and 4.5% decline in Net Interest Income (NII). Operating profits fell 28.5% YoY to ₹1,445 crore. Sequentially, however, net profit rebounded 83.8% from ₹111.9 crore in Q2 FY26.

Net Interest Margin (NIM) showed marginal sequential improvement at 5.9%, up 10 basis points from Q2 FY26.

The bank’s shares closed at ₹149.35 on BSE Friday, up 4.7% from the previous trading session.

Published on January 23, 2026