"Against the backdrop of improved economic conditions, your Bank
has demonstrated healthy growth in advances and deposits."
Dr. Anup Kumar Sinha
Non-Executive (Independent) Chairman
Dear Shareholders,
It is my distinct pleasure to present your Bank's Annual Report for the
financial year ended on March 31, 2023. The Bank had set out on a transformation journey
with the aim of delivering superior value and experience to customers in a rapidly
evolving landscape. Underpinned by the outstanding efforts of its team members,
I am proud to say the Bank is succeeding on this agenda, having
overcome the significant challenges thrown by the pandemic right at the outset of this
journey.
Economic Review
Amid considerable uncertainties about economic activities in a large
number of countries - including major economies such as the US, Euro Area and China -
India has emerged as a shining beacon. With its 7.2% GDP growth in FY 22-23,
India had been the fastest growing large economy in the world last
year, a distinction that India looks set to maintain even in the current year. The Indian
government successfully met its FY 22-23 fiscal deficit target of 6.4% of GDP. Other
noteworthy highlights of the fiscal performance include encouraging tax collections and a
focus on capital expenditure. Although goods exports faced challenges due to the
geopolitical situation and rising oil prices, the country's services exports performed
exceptionally well.
The global repercussions of the war led to significant inflation and
interest rate impact worldwide. In India, consumer prices surged to an eight-year high of
7.8% year-on-year in April 2022 and averaged 6.7% (YoY) during FY 22-23. The surge in
inflation and monetary tightening across the globe prompted the Reserve
Bank of India (RBI) to raise its policy repo rate by 250 basis points
during FY 22-23 to 6.5%, which has since been kept unchanged during the current financial
year. Despite policy uncertainties in the global arena, India's macro parameters presently
suggest that risks of further hike in interest rates in the near term is limited.
India has demonstrated prudent macroeconomic management by avoiding
overstretching during the pandemic.
This approach has contributed to stable growth and effective inflation
management. Furthermore, multidimensional policy initiatives over several years, such as
supply-side policy reforms, boost in infrastructure, formalisation of the economy, Direct
Benefit Transfer and the Insolvency and Bankruptcy Code, have enhanced competitiveness,
promoted inclusion and propelled growth.
Sector Review
The sustained policy focus to strengthen the banking sector has yielded
positive outcomes. Reforms implemented by the government and the RBI have also prompted
greater focus on improving asset quality, with the gross nonperforming assets (GNPA) ratio
reaching a ten-year low of 3.9% in March 2023.
Net non-performing asset also improved to 1% in March 2023, a level
last seen in June 2011. Additionally, stress tests confirm that the banks are well-
capitalised and capable of withstanding adverse macroeconomic conditions. The GNPA ratio
is expected to further decline to 3.6% by March 2024.
Driven by the favourable market conditions and the efforts of the
government and the RBI, banks reported healthy profits in the year in review. Among the
various factors boosting banks' strong performance are the post-pandemic economic
normalisation, recovery in credit demand, and a considerable improvement in asset quality.
Credit growth stood at around 15% for the year, the highest growth in over a decade,
driven by MSME credit (14% y/y), housing loans (15%) and personal loans (21%). Even though
India's credit growth has been impressive, negative credit-to-GDP gap, as compared to
advanced and emerging market peers, means that the banking sector needs to continue its
efforts in reaching out to larger populations for the success of the Indian growth story.
The clean-up of bank balance sheets following the RBI's Asset Quality
Review in 2016 has played a vital role in maintaining the banking sector's resilience
despite the pandemic's impact. It has also facilitated credit expansion during the
economic recovery. Notably, the banking sector achieved the lowest cost of provisioning in
more than a decade during FY 22-23.
The Bank's Progress
Against the backdrop of improved economic conditions, your Bank has
demonstrated healthy growth in advances and deposits. The retail segment, including
housing and MSME loans, has been a significant contributor to credit uptake. Additionally,
the Bank's asset
quality has improved significantly over the past year, while
maintaining a healthy CASA ratio that provides a stable source of funds for lending
activities, enhancing overall financial efficiency.
The growth witnessed in housing finance, commercial loans and retail
loans verticals aligns with the Bank's portfolio diversification agenda. The Bank has also
made substantial progress in its IT and digital transformation journey, which brings it
closer to the vision of becoming a leading digital banking institution. This
transformation will empower the Bank to expand its product offerings, extend its reach and
deliver a frictionless banking experience.
During the year, the Bank crossed the significant milestone of three
crore customers. This accomplishment stands as a testament to the trust diligently earned
over the years and reinforces the Bank's unwavering commitment to upholding the highest
standards of ethics and prioritising customer experiences.
Moving ahead, the Bank is actively expanding new capabilities such as
Commercial Vehicle Lending, Loans against Property for Business and Government Business
Operations. These strategic initiatives aim to create a greater business impact and
enhance the range of services available to customers. Furthermore, the Bank is focussed on
geographic diversification and expanding its market reach to connect with a broader
customer base.
Changes to the Board
In the latter part of the year, the Bank welcomed Ratan Kumar Kesh as
its first Executive Director on the Board. With nearly three decades of rich experience,
Ratan brings valuable expertise in operations, including areas such as transformation,
automation, customer experience and quality improvement. His proven leadership in handling
complex functions will undoubtedly contribute to the continued growth and success of the
Bank. We extend a warm welcome to Ratan and eagerly look forward to his contribution in
taking the Bank to new heights.
The Road Ahead
India's economic landscape is showing signs of continued expansion,
with inflationary pressures easing. The country's growth story is fuelled by strong
domestic demand and a thriving services sector. The recent Consumer Confidence Survey
conducted by the RBI reaffirms positive sentiments regarding the current and future
economic conditions among Indian consumers.
Opportunities for growth are also stemming from government initiatives,
including large investments in infrastructure projects, which not only pushes growth
higher immediately but also boosts the long-term growth potential of the economy. Policies
promoting domestic manufacturing, such as Production Linked Incentives (PLIs), are also
expected to contribute to India's long-term economic growth.
For FY 23-24, India's real GDP growth is projected at around 6.5%. This
healthy economic momentum and the improved resilience of the banking system provide
foundation for a strong credit growth trajectory in the coming years. Risks to India's
growth outlook include weak external demand, volatility in global financial markets,
prolonged geopolitical tensions and the potential impact of El Nino on monsoon patterns.
In Conclusion
The Bank is poised to leverage upcoming opportunities and contribute to
our nation's growth aspirations. The focus remains on driving inclusive banking and being
a Bank for all, providing products and services that cater to changing customer needs, and
building enduring relationships on the firm foundation of trust. By continuing on this
path, the Bank is confident in its ability to generate value and pave the way for a better
and stronger future for all stakeholders.
Warm regards,
Dr. Anup Kumar Sinha
Non-Executive (Independent) Chairman
Message from the MD & CEO
"The unwavering commitment to the Bank's vision has propelled it
forward, enabling considerable progress in key areas such as information technology,
digitalisation, and workforce development, among others areas of thrust."
Chandra Shekhar Ghosh
Managing Director & Chief Executive Officer
Dear Shareholders,
Allow me to start by highlighting one major milestone that your Bank
crossed in the period under review - 3 crore customers. This achievement stands as a
testament to the trust the Bank has diligently built over the years, fortifying its
commitment to serving customers with integrity and reliability. In a short span of seven
and a half years, your Bank has been able to place itself in the minds and hearts of its
customers and all other stakeholders.
As I reflect on the past financial year,
I am encouraged by the performance delivered by the Bank. The Bank's
nearterm vision includes its commitment to portfolio, geographic, people and tech
transformations. The unwavering
commitment to the Bank's vision has propelled it forward, enabling
considerable progress in key areas such as information technology, digitalisation, and
workforce development, among other areas of thrust.
Operational Environment
Despite a challenging global geopolitical backdrop, the Indian economy
experienced a robust revival during FY 22-23 as numerous businesses returned to normalcy,
driven by a substantial increase in both business and consumer confidence. The
Government's emphasis on enhancing infrastructure, promoting local manufacturing, and
nurturing a digitally-empowered economy provided tailwinds to the growth trajectory.
Against this backdrop of improved economic conditions and positive
consumer sentiments, there was a notable surge in credit demand, especially in the latter
half of the year. The festive season brought additional joy, not only for the Bank and the
financial services industry, but also for the entire economy, as festive spending was
observed across all segments of society after nearly two years of subdued activity caused
by the pandemic.
The floods in Assam as well as the high inflation experienced in the
first half of the year, however, did pose some challenges. High inflation and rising
interest rates in several other economies triggered sharp hike in interest rate by the
Reserve Bank of India (RBI). Additionally,
the implementation of new regulatory norms in the first quarter
necessitated the revision of risk assessment practices for microfinance disbursal, leading
to muted growth in the microcredit segment during this period.
Performance Review
While the first quarter witnessed a subdued performance from the Bank,
there was significant improvement from the second quarter. For the full year, the total
advances for the Bank registered a growth of 10%, reaching ?1.09 lakh crore as of March
31, 2023.
In line with the portfolio diversification agenda of your Bank, there
was significant progress made. The secured book as a proportion of the total loan book
increased from 36% in FY 21-22 to around 43% in FY 22-23. The retail loan book, which
includes personal loans, gold loans, two-wheeler loans and auto loans, witnessed a massive
growth of 233% year-on-year, albeit on a relatively smaller base. Additionally, the
Commercial Banking vertical, comprising the Financial Institution group (FIG), MMG, and
BBG, recorded an encouraging growth of 72% year-on-year.
The Bank has experienced strong demand for housing loans. Till the end
of Q3 FY 22-23, housing finance segment registered over 28% YoY growth. In the fourth
quarter, the Bank moved the housing finance vertical to the new tech platform that caused
a temporary slump resulting in a 13% YoY growth in the financial year. This disruption was
a one-time event, and the Bank is now back on track in terms of its growth in housing
loans.
The growth witnessed in the housing finance, commercial loans and
retail verticals is a positive development, aligning with the Bank's portfolio
diversification objectives. Around the
time when your Bank embarked on its portfolio diversification drive a
little over three years ago, even before the onset of the pandemic, microfinance group
loans accounted for nearly 60% of the overall loan book. As of the end of FY 22-23, this
share has reduced to 35%, in line with your Bank's strategic pursuit. The proportion of
loans under commercial banking has reached 18.5%. Additionally, other retail assets such
as gold loans, personal loans, and two-wheeler and auto loans have seen their cumulative
share increase from less than 1% to 5% during this period.
Your Bank's total deposits experienced a healthy growth of 12%
year-on-year, outpacing industry growth, and reached ?1.08 lakh crore. It is noteworthy to
mention that the contribution of MFI customers to the total deposit remains at a low 4.3%.
Deposits are driven by trust, and this is another indication of the trust that your Bank
has been able to garner from customers. The Bank's dedicated focus on deposit mobilisation
has led to a 6% year-on-year growth in CASA deposits, which now stand at ?42,455 crore.
The CASA ratio remains healthy at 39.3%. This growth in CASA deposits is primarily driven
by a substantial 17.5% year-on-year increase in current account deposits.
The fourth quarter, the Bank moved the housing finance vertical to the
new tech platform that caused a temporary slump resulting in a 13% YoY growth in the
financial year. This disruption was a one-time event, and the Bank is now back on track in
terms of its growth in housing loans.
With the restoration of people's livelihoods, the Bank has observed a
strong inclination among customers to regularise their accounts, maintain a healthy credit
record and ensure continued access to formal credit. In line with this, the Bank has
achieved an overall collection efficiency (excluding NPA) of 98.5% in the month of March
2023. In the year in review, the Bank also received a sum of ?917 crore from the
government as part of the Credit Guarantee Fund for Micro Units (CGFMU).
In FY 22-23, your Bank has achieved a net profit of ?2,195 crore, a
significant increase from ?126 crore in the previous year. While operating profit
witnessed a decline of 11.5% to ?7,091 crore, it was due to extensive hiring to support
the growth aspirations, distribution expansion and investments in tech infrastructure.
Your Bank's efforts towards tightening underwriting standards and
managing asset quality have yielded positive results. As of March 31, 2023, Gross NPA
stood at 4.9%, showing a sharp improvement from 6.5% a year back. Furthermore, Net NPA
stood at 1.2% as of March 31, 2023, compared to 1.7% in the same period of the previous
year. These figures reflect the Bank's commitment to maintaining a healthy loan portfolio
and managing credit risks effectively.
In terms of geographical diversification, the Bank has made continued
progress in expanding beyond eastern India. Of late, customer base expanded rapidly in
various relatively new geographies, with states like Uttar Pradesh and Bihar now featuring
among our top three markets, along with West Bengal. While your Bank continues to maintain
a strong presence in rural and semi-urban areas, it is also strengthening presence in
metro and tier-1 cities to cater to a broader
customer base, in line with its agenda of being a bank for all. As of
March 31, 2023, the Bank operates a total of 5,999 banking outlets, reflecting an increase
of 360 banking outlets during FY 22-23.
IT & Digital Transformation
The Bank has made strong progress in its IT and digital transformation
journey, driving it towards the goal of becoming one of the frontrunners in digital
banking capabilities. A notable achievement is the growing adoption of digital channels by
our non-micro credit customers, with 94% of their transactions now conducted through
digital mediums, up from 90% in the previous year. Furthermore, the popularity of UPI
transactions through Bandhan Bank has increased, with an impressive 53 crore transactions
processed in the past year. This continued shift towards digital channels underscores the
trust your Bank's customers place in its digital offerings and the Bank's steadfast
commitment to delivering a frictionless banking experience.
In line with the rapid growth in digital adoption, your Bank's online
channels have emerged as a key driver, accounting for 31% of retail deposits. As the Bank
strives for digital excellence, it introduced the pilot phase of Neo+ Digital Savings Bank
accounts. The Bank has also deployed 30,000 biometric-enabled tablets to streamline the
account opening and customer onboarding procedures and strengthen last mile banking. This
transformative initiative has resulted in substantial enhancements in operational
efficiency and customer convenience.
As part of the comprehensive IT transformation strategy, your Bank has
successfully migrated the Housing Finance portfolio to a new Core Banking System (CBS),
integrating the Loan Origination System and Loan Management System. Building on this
achievement, the Bank is now poised to embark on the migration
The Bank's focus on areas such as Commercial Vehicle Lending, Loans
against Property for Business, and Government Business, among others, will contribute to
the top line and bottom line, further strengthening your Bank's position in the industry.
... /
of our other business verticals to the advanced new CBS, in FY 23-24.
The new CBS will empower the Bank to introduce a range of new products
with speed. These innovations will not only enhance the customer experience but also
create additional avenues for customer engagement and deposit growth. These capabilities
will help drive greater customer traction, resulting in more products per customer and
higher life time value.
The Bank continues to prioritise the enhancement of its online presence
and the delivery of exceptional digital banking experiences. Digital Banking solutions are
in an everlasting state of evolution and in the coming financial year, your Bank will
introduce omnichannel internet and mobile banking platforms. This strategic initiative
reinforces the Bank's digital capabilities, allowing it to offer a seamless and integrated
banking experience across various channels for its valued customers.
People Initiatives
Human capital is one of the most important assets for your Bank. The
Bank has always placed significant emphasis on training. I am happy to tell you that over
99% of the Bank's employees received at least one training in the year in review. The
training conducted through online,
app-based and classroom modules totalled 16 lakh man hours.
Performance Appraisals
Your Bank utilises a structured performance review process to identify
talent for vacant roles and facilitate career progression. Additionally, an Internal Job
Posting (IJP) mechanism enables employees to apply for open positions within the Bank. In
the past year, 9,307 employees received grade promotions, while 5,690 employees were
elevated to higher roles based on competency analysis. The Bank has also conducted
thorough succession planning for key departments and is actively addressing identified
gaps through internal hiring.
To keep pace with your Bank's rapid expansion plans, the Bank has
increased manpower by 16% in the year under review. The Bank also focussed on getting on
board young and diverse talent through campus hiring drives. The Bank hired a total of
1,102 employees across levels and locations through this drive. With the tech
transformation currently underway, your Bank will activate stronger productivity
enhancement tools and processes to help them discharge their duties even better.
Business Strategy & Outlook
Your Bank's business strategy is aligned with its vision of sustained
growth with strategic diversification. India today stands at the cusp of an excellent
growth phase, and the Bank is dedicated to partnering with the growth aspirations of our
nation and its people. Our strong granular and retail deposit franchise is a testament of
the trust shown by the customers in the bank.
While maintaining the Bank's strong presence in the East and Bharat
regions, it has been actively expanding its presence across the nation.
Through targeted geographic diversification, deeper market penetration, localised hiring,
and leveraging the Bandhan brand, the Bank aims to establish a dominant position in
driving greater momentum and success.
To unlock significant business impact, the Bank is developing new
capabilities and exploring diverse revenue streams. The Bank's focus on areas such as
Commercial Vehicle Lending, Loans against Property for Business, and Government Business,
among others, will contribute to the top line and bottom line, further strengthening your
Bank's position in the industry.
Driving cross-sell and branch-led sales is a key priority for expanding
the Bank's retail assets and liabilities portfolio.
The Bank is implementing multiple initiatives to maximise the potential
of its branch network, enhancing employee productivity through the effective use of
digital and data analytics.
Your Bank has achieved considerable success in moderating its credit
cost and will continue to work towards getting it to pre-pandemic level of below 2%. We
are confident that with the steps the Bank has taken so far and a strong future business
outlook, we will continue to improve our profitability and deliver on the promises made to
our shareholders.
Recognitions received
As a part of its people transformation agenda, your Bank has been
working to increase employee engagement across levels. To measure the engagement, your
Bank conducted the 'Bandhan Employee Engagement Study' in collaboration with Gallup, the
global leader in employee engagement research. Over 35,000 employees took part in the
survey. I
am happy to inform you that based on the engagement scores recorded in
the survey, your Bank received the 'Gallup Exceptional Workplace Award 2023'. It is
noteworthy that only 57 companies worldwide, spanning various sectors, were honoured with
this award. That is not all, your Bank was also recognised as one of the World's Best
Banks of 2023 by Forbes and Statista. This is a result of your trust in us.
I extend my heartfelt gratitude to all those who have played a part in
your Bank's success. I would like to express my sincere appreciation to the Bank's
customers, whose trust and loyalty have been instrumental in its journey. I also extend my
gratitude to the shareholders for their unwavering support. Last but not least,
I want to acknowledge the exceptional dedication of the Bank's
employees, whose commitment to serving customers is unparalleled.
Thank you all for your continued belief in Bandhan Bank as it
steadfastly pursues its vision to become a world-class financial institution for all.
To unlock significant business impact, the Bank is developing new
capabilities and exploring diverse revenue streams.
The Bank's focus on areas such as Commercial Vehicle Lending, Loans
against Property for Business, and Government Business, among others, will contribute to
the top line and bottom line, further strengthening your Bank's position in the industry.
Warm regards,
Chandra Shekhar Ghosh
Managing Director & Chief Executive Officer