Real reason behind Bandhan Bank's rising NPA

Over 75 per cent of the bank's Rs 175 crore NPA arises from Uttar Pradesh, Madhya Pradesh and Maharashtra.

Agri loan waivers in Uttar Pradesh, Madhya Pradesh and Maharashtra have not only added stress to HDFC Bank, which has considerable direct exposure in the sector in these states, but Bandhan Bank, which doesn't even have a direct agri exposure has also come under stress as a result of the government scheme.

The bank's gross non-performing asset (NPA) rose sharply to 0.82 per cent during the quarter ended June 30, 2017 as against the gross NPA of 0.38 per cent just a quarter back.

On a year-on -year comparison, the gross NPA stood at 0.22 per cent during the first quarter of the 2016-17 fiscal year.

The bank's managing director and CEO, Chandra Shekhar Ghosh attributed payment indiscipline arising from such waivers as the primary cause for the steep rise in the NPA.

"Any loan waiver affects the loan repayment culture. People are told that you won't have to repay the loan. That's the general understanding of people when a loan waiver scheme is announced", he said.

Over 75 per cent of the bank's Rs 175 crore NPA arises from these three states.

Although Bandhan Bank has refrained from direct agricultural loans, most of its disbursements in these three states are towards the allied agro sector like vegetable cultivation, fisheries and others.

"However, we have done a one per cent provisioning while the RBI had asked us for a 0.4 per cent", he added.

To add to Ghosh's concern, the ongoing political showdown in Darjeeling is poised to further the gross NPA in the coming quarters.

Its loan disbursement in the Darjeeling-Sikkim belt, which is mainly micro credit, is to the tune of Rs 20-25 crore.

Owing to the ongoing shutdown in the area, the bank's collection agents from 10-11 collection centres are unable to collect repayments from the borrowers in the hills of northern West Bengal.

"Till now, the loans from Darjeeling, hasn't turned out to be NPA, but is expected to become soon", the bank's managing director and CEO, Chandra Shekhar Ghosh said.

"Since the situation is tense there, I am not able to ask my staff to go there in case any incident happens. I can't put their life is put in danger", he added.

The tea and tourism sector, as a result of the ongoing political tension there, is estimated to have undergone at least Rs 350 crore loss since tensions erupted in early June.

The bank's net interest income during the quarter ended June 31, 2017 rose by 38 per cent at Rs 743 crore as against Rs 538 crore earned during the year-ago period.

Its net profit, in the quarter under review grew by 35 per cent at Rs 327 crore as against Rs 242 crore during the first quarter of the year ended March 31, 2017.

In the coming days, Ghosh will be focusing on increasing disbursals in the MSME and affordable housing segment.

Photograph: Reuters