Bandhan Bank Seeks to Trim Bad Loans by Selling Rs. 500 Crore Home Loan Portfolio Sale

Embrace financial transformation as Bandhan Bank units with ARCs, offering distressed home loans worth Rs 500 crore for a brighter tomorrow.

Kolkata-based Bandhan Bank is tackling its bad loan situation by selling a retail mortgage portfolio worth Rs. 500 crore to asset reconstruction companies (ARCs). To reduce its share of non-performing assets, the bank offered ARCs to purchase approximately 5,800 home loan accounts.

According to insiders, these account's total principal loan book costs Rs. 500 crore. While the bank has not specified a reserve price, it has expressed a preference for upfront cash offers. Bandhan Bank aims to complete the transaction by August, seeking to improve its financial position.

In the past month, Bandhan Bank shares witnessed a 13% decline. The bank's shares on the Bombay Stock Exchange concluded at Rs. 211.7, marking a 1.3% drop from the previous day's closing.

As of June 30, the bank's mortgage loan book was reported to be Rs 26,950 crore. It comprises various loan categories, including retail home loans, loans against property, construction loans, and purchase of performing retail loan books. However, the bank's mortgage loan book also carries a gross non-performing asset of Rs 1,090 crore as of June 30.

Bandhan Bank's retail home loan book amounted to around Rs. 21,000 crore at the end of the first quarter. The bank expanded its portfolio by acquiring Gruh Finance, a housing finance company, from HDFC in October 2019. Gruh Finance held a retail loan book of Rs 17,600 crore at the time of acquisition.

The Covid-19 pandemic has also impacted Bandhan Bank's loan portfolio, leading to a surge in defaults in retail home loans. While the central bank's relaxation of loan classification rules during the pandemic offered some respite, the bank aims to address these issues by selling distressed loan assets to ARCs.

Bandhan Bank's strategic move to sell stressed home loans is expected to attract interest from various asset reconstruction companies to streamline its books and improve financial stability.