Bandhan Bank completes ₹6,872 cr NPA sale to ARCs

What Bandhan Bank announced

Bandhan Bank has completed a major asset clean-up exercise by selling a pool of non-performing assets (NPAs) and written-off portfolios to asset reconstruction companies (ARCs). The bank said it transferred portfolios totaling ₹6,872.36 crore for an aggregate consideration of ₹901.72 crore. The exercise matters because it directly targets stressed exposures in a segment that has been a key contributor to the bank’s gross NPAs.

The sale was executed through two separate transactions. Asset Reconstruction Company (India) Limited (ARCIL) acquired the NPA pool through the Swiss Challenge method, while Phoenix ARC bought the written-off pool through an auction route. Bandhan Bank had earlier disclosed that its board approved the plan in November, positioning the sale as a balance sheet-strengthening step focused on asset quality.

Two transactions, two routes

Bandhan Bank structured the clean-up using two commonly used transfer methods. The NPA pool was sold using a Swiss Challenge process, a format where a base bid is used to invite challengers to match or improve the offer. The written-off pool was sold via auction, which is typically used for open bidding, especially where exposures have already been written off.

In its earlier disclosures, Bandhan Bank had indicated that the identified stressed pool was drawn from its Emerging Entrepreneurs Business (EEB) and Aspiring Business Group (ABG) portfolios. These segments include group loans, small business loans, and agricultural lending exposures.

Deal 1: ARCIL buys the unsecured NPA pool

ARCIL acquired Bandhan Bank’s unsecured NPA portfolio that was more than 180 days past due. The transaction was conducted through the Swiss Challenge method.

Bandhan Bank disclosed the following key parameters for the ARCIL transaction:

• Principal outstanding: ₹3,165.25 crore
• Total consideration: ₹569.75 crore
• ARCIL’s SR subscription: ₹303.39 crore (53.25%)
• Bank’s SR subscription: ₹266.36 crore (46.75%)
• Transaction method: Swiss Challenge

The bank said the process was initiated after receiving a binding base bid from ARCIL, following which it invited competing bids under the Swiss Challenge framework.

How the Swiss Challenge process played out

Under the Swiss Challenge structure, competing bids were required to offer at least a 5% mark-up over the anchor bid. The process also required a minimum cash component of 53.25% of the total bid value.

Sources cited in the report said the initial offer from ARCIL was pegged at ₹578.19 crore, which was described as around 18% of the outstanding principal, and that this triggered the Swiss Challenge process. The same sources said no rival bidders submitted qualifying offers in the second round, allowing ARCIL to acquire the portfolio.

Bandhan Bank also disclosed that the NPA portfolio included unsecured loans that were more than 180 days past due. The principal outstanding for this portfolio was cited as ₹3,212 crore as of September 30, 2025 in the report’s broader context.

Deal 2: Phoenix ARC buys the written-off portfolio

Separately, Phoenix ARC purchased Bandhan Bank’s written-off portfolio for ₹331.97 crore through an auction process. Bandhan Bank’s overall consideration across both transactions amounted to ₹901.72 crore.

In the earlier board-approved plan and exchange disclosures, the written-off portfolio was described as having a principal outstanding of ₹3,719.14 crore as of September 30, 2025. The bank had said it would sell this pool through the auction route.

Where the stress came from: EEB and ABG

Bandhan Bank identified the pool for sale from EEB and ABG, covering group loans and small business and agri lending. The EEB segment was described as the highest contributor to the bank’s gross NPAs and as carrying the largest stressed asset value across segments, based on the bank’s Q2 FY26 investor presentation.

The same context noted that the EEB segment had seen a consistent increase in reported NPAs across the previous four quarters. Against that backdrop, the bank’s move to transfer stressed exposures to ARCs was positioned as a targeted clean-up effort.

Earlier approval and the identified pool size

Bandhan Bank had informed exchanges that its board of directors, at a meeting held on November 27, 2025, approved the sale of identified NPA and written-off loan portfolios via bidding with ARCs or other permitted transferees.

In that disclosure, the bank stated that as of September 30, 2025:

• NPAs (180+ DPD) were ₹3,212.17 crore
• Written-off loans were ₹3,719.14 crore
• Total pool was ₹6,931.31 crore

The completion update referenced a total of ₹6,872.36 crore transferred to ARCs. Both figures were cited in the source context, with the larger number tied to the identified pool in the exchange filing.

Regulatory framework: RBI’s TLE rules

The structure of the sale was described as aligning with the RBI’s Master Direction on Transfer of Loan Exposures (TLE). These directions govern the process for transferring loan exposures, including the use of mechanisms such as Swiss Challenge for certain pools and auctions for others.

The bank also indicated it could use a combination of outright cash and security receipts (SRs), depending on the interest shown by ARCs. In the ARCIL transaction, the consideration structure included SR subscriptions split between ARCIL and the bank.

Key deal snapshot

Why this matters for investors

For investors tracking Bandhan Bank’s asset quality, the sale is a concrete step that shifts a meaningful stressed pool off the bank’s books and into ARCs. The transaction is also notable because it was described as the bank’s first major NPA sale since FY24, when it sold ₹7.2 billion.

The choice of two routes also highlights how banks tailor transfer mechanisms to the nature of the pool. The Swiss Challenge route provides a structured way to test price discovery around a base bid, while the auction route is commonly used for written-off pools.

What to watch next

Bandhan Bank had indicated an intention to finalize the divestiture within the current third quarter (December quarter), according to a report citing a senior official. With the bank now stating it has completed the sale, the next set of updates investors will look for are how the transfer influences reported asset quality indicators in subsequent disclosures and presentations.

Conclusion

Bandhan Bank’s completion of the sale of NPAs and written-off portfolios totaling ₹6,872.36 crore for ₹901.72 crore marks a significant clean-up of stressed exposures tied to EEB and ABG. The bank executed the transfer through two transactions, with ARCIL buying the NPA pool through Swiss Challenge and Phoenix ARC acquiring the written-off pool via auction. The bank’s next formal signals on the impact are expected through its upcoming financial disclosures and investor communications.