Bandhan Bank's Q3 FY26: A Quarter of Strategic Rebalancing and Digital Momentum

Bandhan Bank Limited has navigated its third quarter of Fiscal Year 2026 with a clear focus on strategic rebalancing, asset quality improvement, and digital transformation. The bank reported a healthy 10% year-on-year (YoY) growth in gross advances, reaching ₹1,45,220 crore. When adjusted for the strategic sale of non-performing assets (NPAs), the underlying advances growth was even more robust at 12% YoY and 6% quarter-on-quarter (QoQ), signaling sustained business momentum.

On the liabilities front, total deposits grew 11.2% YoY to ₹1,56,720 crore, outpacing advances growth and reinforcing the bank's commitment to funding stability. However, the CASA (Current Account Savings Account) ratio saw a 4% YoY decline to 27.3%, primarily due to adjustments in savings rates. Despite this, the bank's overall retail deposit mix improved to 72.4%, underscoring a push towards greater granularity and stability in its liability profile. Net Interest Income (NII) for Q3 FY26 stood at ₹2,690 crore, a 3.8% QoQ improvement, with Net Interest Margin (NIM) improving to 5.9% due to a reduction in the cost of funds.

Strategic Portfolio Diversification and Asset Quality Enhancement

A cornerstone of Bandhan Bank's strategy in Q3 FY26 was the continued diversification of its loan book and aggressive measures to enhance asset quality. The bank significantly strengthened its secured book, which now constitutes 56.7% of total advances, up from 50.7% in the previous year. This shift towards secured lending is a deliberate move to improve the overall risk profile and ensure long-term stability.

A key highlight of the quarter was the strategic sale of NPAs and written-off accounts to Asset Reconstruction Companies (ARCs). The bank sold ₹3,165 crore of NPAs and ₹3,707 crore of written-off portfolios, realizing cash inflows and significantly improving its asset quality metrics. The Gross NPA ratio sharply declined to 3.3% from 5.0% QoQ, and the Net NPA ratio improved to 1.0% from 1.4% QoQ. The Provision Coverage Ratio (PCR) stood at 70.8%, with PCR including security receipts at 74.2%, reflecting a stable provisioning position even after the NPA sale.

Collection efficiency also saw a notable improvement, with overall collection efficiency (excluding NPAs) rising to 98.1% in December 2025. Slippages declined across the board, particularly in the Emerging Entrepreneurs Business (EEB) segment, which saw a moderation to ₹942 crore from ₹1,118 crore in Q2 FY26. Management expressed confidence that the de-growth phase in the EEB book is behind them, with underlying growth expected to resume.

Digital Advancement and Operational Excellence

Bandhan Bank continued to prioritize its digital transformation agenda, launching several initiatives to enhance customer experience and operational efficiency. The bank upgraded its Corporate Internet Banking (CIB) platform, integrated Razorpay as a payment gateway partner, and introduced an In-App Collection Solution for mobile-based payments. These efforts have resulted in 98% of retail transactions now being digital and 89% of savings accounts opened digitally.

In the EEB segment, new control enhancements include real-time SMS acknowledgements for cash collections and a digital dashboard for operations executives. Product enhancements include new 18-month and 36-month tenure options for group loans and expanded repayment flexibility (bi-weekly and monthly), aimed at reducing repayment stress and improving financial planning for customers.

The bank also expanded its physical footprint, adding 20 new branches and converting 57 housing finance centers into full-fledged banking branches, taking the total branch network to 1,831. This expansion, coupled with digital initiatives, aims to deepen customer engagement and reach across diverse geographies.

Outlook and Management Commentary

Management expressed confidence in the bank's trajectory, highlighting that the strategic rebalancing of the portfolio, initially targeted for FY27, has been pre-achieved. They anticipate further improvements in asset quality, with a credit cost guidance of 1.6-1.7% by FY27. NIMs are expected to stabilize around 6%, supported by a sustained reduction in the cost of funds and improved deposit mix.

While acknowledging the impact of one-off items and regulatory provisions (such as ₹120 crore for gratuity due to new labor codes) on current profitability, the bank remains focused on long-term sustainable growth. The emphasis on a diversified asset base, granular deposits, and robust digital infrastructure positions Bandhan Bank for continued resilience and growth in the coming quarters. The bank aims for a 15-17% CAGR in advances and higher deposit growth over the next 2-3 years, reinforcing its commitment to building a stronger, more diversified financial institution.