Bandhan Bank sheds 7% as Rs 23,300-cr loans go under evergreening review

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Shares of Bandhan Bank plunged over 7 percent to Rs 200 each on February 12 as loans worth Rs 23,300 crore it lent out under credit guarantee schemes came under review by the National Credit Guarantee Trustee Company (NCGTC) on doubts of evergreening.

Evergreening of loans is a practice of extending new or additional loans to a borrower who is unable to repay the existing loans, thereby, concealing the true status of non-performing assets (NPAs) or bad loans.

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A document accessed by Moneycontrol shows the auditor will perform data analytics on the portfolio to identify evergreening of loans. It will review Rs 20,800 crore of loans covered under the Credit Guarantee Fund for Micro Units (CGMFU) and Rs 2,500 crore of loans covered under the government’s Emergency Credit Line Guarantee Scheme (ECLGS).

Also read: Bandhan Bank Q3 profit jumps over two-fold to Rs 733 crore

In FY20-21, Bandhan Bank had secured insurance of Rs 20,800 crore through CGFMU and distributed nearly Rs 1,950 crore under ECGLS. Out of this, nearly 85 percent has been repaid by customers and the remaining portfolio carries 88 percent provisioning.

In the case of Bandhan Bank, the audit extends beyond NPA accounts subject to guarantee claims initiation. It also involves identifying trends and patterns to evaluate portfolio inflation through fictitious customers.

Bandhan Bank’s total income declined 1 percent year-on-year (YoY) to Rs 307 crore in Q3FY24, while operating profit slipped 13.5 percent to Rs 166 crore. The lender’s net interest margin (NIM) expanded by 70 basis points (bps) to 7.2 percent in the December-ended quarter.

Also read: Buy Bandhan Bank; target of Rs 290: Emkay Global Financial

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On the asset-quality front, the lender’s gross non-performing assets (NPAs) improved to 7 percent in Q3FY24 from 7.2 percent in Q3FY23. Net NPA, however, deterioated to 2.2 percent in Q3FY24 from 1.9 percent in the year-ago period.

The Bandhan Bank shares have lost 12 percent in the past one month, as against a 1.8 percent drop in the benchmark Sensex. The stock had hit 52-week high of Rs 272 on June 1, 2023 and a 52-week low of Rs 182 on March 28, 2023.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.


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Written by Moneyofficeteam

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