Why Is Bandhan Bank’s Turnaround Taking Longer Than Expected?
Bandhan Bank’s journey over the last few years has been a lesson in how fast-growing financial institutions can be tested when external shocks collide with concentrated business models. Once celebrated as one of India’s most successful microfinance-to-bank transitions, Bandhan Bank today finds itself under constant market scrutiny. Investors are no longer asking whether the bank will survive — they are asking when consistency, predictability, and confidence will truly return.
The recent operating environment suggests that the worst phase of asset quality stress may be behind the bank. Yet, market pricing continues to reflect scepticism. This disconnect between stabilising fundamentals and subdued valuations makes Bandhan Bank an important case study in behavioural finance, risk perception, and the time it takes for trust to rebuild in financial markets.
About Bandhan Bank and Its Core Franchise
Bandhan Bank operates with a strong presence in eastern and northeastern India, with deep roots in microfinance lending. Its original strength was built on group-based lending, high-touch customer relationships, and granular loan ticket sizes. Over time, the bank expanded into MSME, housing, and retail deposits to diversify its balance sheet.
However, concentration in specific geographies and borrower profiles meant that disruptions — first from regulatory changes and later from the pandemic — had an outsized impact. What followed was a prolonged phase of elevated NPAs, restructuring, and earnings volatility.
Asset Quality: Stabilisation Is Real, But Memories Are Long
Over recent quarters, Bandhan Bank has reported steady improvement in gross and net NPA ratios, supported by higher recoveries and lower slippages. Credit costs have moderated, and provisioning buffers have improved. From a purely numerical standpoint, this indicates that the balance sheet is healing.
Yet markets rarely forget past pain quickly. For many investors, Bandhan Bank’s name is still associated with repeated negative surprises. This psychological overhang explains why valuation rerating often lags actual improvement in financial metrics.
Deposit Franchise: The Silent Strength
One of the most underappreciated aspects of Bandhan Bank’s story is the resilience of its deposit base. Despite stress periods, the bank has managed to grow deposits steadily, improving its CASA mix and reducing reliance on bulk funding. This is critical for any bank aiming to stabilise margins and improve long-term profitability.
A stable deposit franchise provides optionality — it allows management to recalibrate lending growth without liquidity pressure. Over time, this becomes the foundation for sustainable return on assets.
Growth Versus Prudence: A Delicate Balance
Bandhan Bank’s current strategy appears deliberately cautious. Loan growth has been measured, underwriting standards tightened, and geographic diversification improved gradually. While this may cap near-term growth rates, it significantly reduces the risk of another sharp asset quality shock.
For investors accustomed to high-growth banking stories, this phase can feel uninspiring. However, history suggests that the most durable banking franchises are built during such periods of restraint rather than exuberance.
Valuation and Market Expectations
Bandhan Bank continues to trade at a valuation discount to peers with similar balance sheet sizes. This discount reflects execution risk, regional concentration concerns, and investor fatigue. However, it also creates optionality if profitability normalises faster than expected.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes that Bandhan Bank’s story is less about speed and more about credibility rebuilding. Markets often reward consistency long after the first signs of recovery appear. Investors who focus on balance sheet discipline, deposit stability, and gradual improvement rather than headline growth may better navigate such turnaround phases. Deeper market insights and structured analysis are available at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
