Bandhan Bank has successfully completed the sale of a substantial microfinance non-performing loan portfolio to Asset Reconstruction Company (India) (ARCIL), marking a significant step in the bank's asset quality management strategy. The transaction involved unsecured loans that were severely stressed, reflecting broader challenges in the microfinance sector.

Transaction Details

The sale encompassed a microfinance NPL portfolio with specific characteristics and valuation metrics. The portfolio comprised unsecured loans that were more than 180 days past due, representing severely distressed assets requiring resolution.

Swiss Challenge Process

The transaction was executed through a Swiss Challenge mechanism initiated after Bandhan Bank received a binding base bid from ARCIL. Under this structure, the bank invited competing bids that were required to offer at least a 5% mark-up over the anchor bid, with a minimum cash component of 53.25% of the total bid value. The initial offer from ARCIL was pegged at ₹578.19 crore, approximately 18% of the outstanding principal, which triggered the competitive bidding process. However, no rival bidders submitted qualifying offers in the second round, allowing ARCIL to acquire the portfolio.

Additional Asset Sale Initiative

Separately, Bandhan Bank has initiated another asset sale process involving a different loan portfolio. This additional transaction comprises:

• Portfolio composition: Group loans, small business loans, and agri and small enterprise loans
• Outstanding amount: ₹3,720.00 crore
• Expected sale price: ₹333.00 crore

Asset Quality Metrics

The bank's asset quality indicators reflect the ongoing challenges in the microfinance segment. Bandhan Bank's financial health metrics showed elevated stress levels compared to historical performance.

The elevated NPA ratio is primarily attributed to ongoing stress in the microfinance segment, which has kept the bank's asset quality under pressure. The bank's efforts toward strengthening underwriting policies and risk monitoring mechanisms are expected to benefit operations in the long run. However, external challenges impacting unsecured asset classes, particularly the microfinance segment, remain a key area to monitor in the near to medium term.

The Reserve Bank of India has approved Ratan Kumar Kesh's return as Executive Director at Bandhan Bank , marking a significant development in the bank's leadership structure.

Regulatory Approval

The RBI's approval is a crucial step for senior executive appointments in banking institutions, as regulatory clearance is mandatory for key leadership positions in the financial sector.

Leadership Development

This appointment represents an important addition to Bandhan Bank's executive team, with Kesh returning to the Executive Director role at the institution.

The approval process reflects the regulatory oversight that governs senior appointments in India's banking sector, ensuring appropriate leadership standards are maintained across financial institutions.