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Crisil Ratings has downgraded its rating on non-convertible debentures of Bandhan Bank Ltd to ‘Crisil AA-/Stable’ from ‘Crisil AA/Negative’ and reaffirmed its ‘Crisil A1+’ rating on the certificate of deposits.
The rating action reflects the longer than anticipated delay in restoration of asset quality and overall profitability of the bank, to pre-Covid levels. Despite momentary correction in fourth quarter of fiscal 2023, the bank’s asset quality metrics have remained volatile since the pandemic outbreak, thereby constraining its overall profitability.
While the bank is endeavouring to diversify its presence into non-eastern parts of the country through its retail secured asset portfolio – its ability to replicate the growth trajectory for the non-microfinance (non-Emerging Entrepreneurs Business [EEB] vertical) portfolio across the country will remain crucial, Crisil said.
The bank’s portfolio remains regionally concentrated and susceptible to local socio-political risks inherent in the micro loan business given the modest credit risk profile of borrowers.
“Nonetheless, the ratings remain driven by the bank’s established track record in the micro-loan segment and potential benefits accruing from gradual diversification across secured asset classes, robust capitalisation, and healthy deposit franchise,” it added.
In line with Crisil Ratings’ withdrawal policy, the rater has also withdrawn ₹265 crore of NCDs as the same has been repaid.
The stock of Bandhan Bank closed flat at ₹253.90 on the BSE.
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