NIMs stabilising, and the drivers are structural
Net Interest Margins improved sequentially to 6.2% in Q4, and Sengupta believes this recovery has legs — at least through the first half of FY27. Two factors are doing the heavy lifting. First, a large chunk of Bandhan’s deposits that were locked in at higher rates have now matured and are being renewed at lower rates, bringing down the cost of funds. Second, slippages have declined sharply, reducing the interest reversals that were quietly dragging NIMs lower.
“These two factors will remain at least in Q1 and Q2 of the current financial year,” Sengupta said, adding that maintaining steady improvement in gross slippages — as exhibited in Q4 — would be key to holding NIMs in place. He was more circumspect about H2, flagging global uncertainty around inflation and the ongoing West Asia conflict as variables that could shift the picture.
Credit costs on a clear downward path
The improvement in asset quality is perhaps the most significant story in Bandhan’s Q4 results. The bank exited the quarter with a credit cost of 2%, and has guided for a reduction to 1.6–1.7% going forward. Recoveries improved, slippages fell, and stress across the SMA 0, SMA 1, and SMA 2 buckets all declined meaningfully. The ARC sale that supported Q3 numbers played no role in Q4, making the improvement more organic and credible.
CASA: Progress, but work still to do
CASA grew 29.3% sequentially, but is still lower on a year-on-year basis — a legacy of a deliberate strategic choice. Bandhan pruned approximately Rs 18,000 crore in high-cost savings deposits, mainly from government PSUs and corporate accounts, by lowering interest rates on large granular deposits. The bank recovered around Rs 16,000 crore of that through traditional retail savings deposits — a healthier, stickier source of funding.
CASA ratio, which had slipped to 27% in Q3, has recovered to 29%. The stated target is 31%, which Sengupta described as the next milestone, with further targets to be set once that is achieved.
ROA and ROE: A credible recovery trajectory
The profitability turnaround has been swift. ROA, which stood at just 0.2% in September, improved to 0.4% in December and has now reached 1.1% in Q4. ROE has moved up to 8.5%. Sengupta has kept his FY27 exit guidance intact — an ROA of 1.5–1.6% and an ROE above 15%.The levers are clear: continued asset quality improvement in the microfinance book, a growing wholesale banking portfolio generating non-interest income, and a disciplined approach to deposit and credit mix.
Growth targets: 15% credit, deposits to keep pace
On overall growth, Sengupta guided for at least 15% credit growth in FY27, with deposit growth targeted slightly higher — though he acknowledged the industry-wide challenge of deposit mobilisation lagging credit demand since November.
West Asia: Watchful but not alarmed
On geopolitical risk, Sengupta noted that collection efficiency has held up well and no material impact from the West Asia conflict has been felt so far. He remained hopeful but clear-eyed: if the situation escalates, no Indian bank will be insulated.