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Bandhan Bank Q4 FY26: Asset quality stabilises, margins recover, and deposits get more granular

Bandhan Bank closed Q4 FY26 with a visibly stronger quarter even as FY26, as a full year, reflected the hangover of stress in the Emerging Entrepreneurs Business (EEB) portfolio. The bank reported profit after tax of ₹534 crore in Q4 FY26, up 68% year on year and 159% sequentially. Net interest income rose to ₹2,800 crore, while net total income stood at ₹3,570 crore.

The improvement was supported by three clear drivers that management repeatedly emphasised during the earnings call: a stronger liability mix and lower funding cost, better portfolio behaviour in EEB, and a moderation in credit costs. Gross and net NPA ratios were stable at 3.3% and 1.0% respectively as of March 31, 2026, while quarterly credit cost declined to 2.0%.

Balance sheet growth continues, with a visible shift in mix

Gross advances ended March 2026 at ₹1,54,230 crore, growing 12.6% year on year and 6.2% quarter on quarter. Deposits stood at ₹1,66,340 crore, up 10.0% year on year and 6.1% sequentially. The bank’s longer-running transition towards a more diversified and secured loan book continued, with the secured share rising to 56.2%.

A key theme across both the investor deck and the call was that non-EEB segments are now a larger part of the growth engine. While EEB (Group plus SBAL) formed about 35% of the loan book at March 2026, housing and retail together contributed about 33% and wholesale banking about 31%.

Financial snapshot (Q4 FY26)

Note: All figures are as disclosed by the bank for Q4 FY26.

Deposits: retail share improves, CASA rebounds sequentially

On liabilities, Bandhan Bank highlighted a steady push towards a more granular and stable deposit base. Retail deposits constituted 73.7% of total deposits in Q4 FY26, up from 68.9% a year ago. Retail deposits grew 17.7% year on year to ₹1,22,550 crore.

CASA ratio, which had seen pressure earlier in the year, improved sequentially to 29.3% from 27.3% in December 2025, though it remained lower than 31.4% in March 2025. Management attributed the improvement primarily to current account traction. During Q and A, the bank stated that government CASA deposits were around ₹6,000 crore and that government deposits were about 12% of CASA.

The bank also acknowledged the competitive deposit environment. Management said deposit competition was intense and that peers raised rates in March. Despite that, the bank reiterated its strategy to prioritise retail deposit granularity over bulk deposit growth.

Asset quality: lower slippages and better EEB collections support credit cost reduction

The sharpest improvement in Q4 came from credit costs and early delinquency indicators. The bank disclosed that fresh slippages reduced to ₹1,030 crore in Q4 FY26 from ₹1,310 crore in Q3 FY26. Segmentally, EEB remained the largest contributor to gross NPA in absolute terms, but both the investor deck and management commentary suggested improving portfolio behaviour.

Collection efficiency (excluding NPA and excluding arrears) improved to 98.6% for March 2026, and quarter-wide collection efficiency excluding NPA improved to 99.3%. Management also highlighted that the 0 to 90 DPD pool in EEB declined to about 3.1% of advances from 4.6% in the prior quarter.

Provision coverage ratio (PCR) was 71.1% at March 2026, and the bank stated PCR including security receipts was 74.2%. The presentation also disclosed PCR including technical write-offs at 84.9%.

Profitability: margins recover, but cost pressures persist

NIM improved to 6.2% in Q4 FY26 from 5.9% in Q3 FY26. Management linked the uptick primarily to a reduction in deposit costs and some improvement in yields. On the call, the CFO stated that the bank expects an additional 10 to 20 bps improvement in NIM over the next two to three quarters from the Q4 level as term deposits reprice.

Non-interest income rose to ₹771 crore in Q4 FY26. The bank’s other income table showed growth led by processing fees and third-party income. Management called out improved branch-level penetration and stronger cross-sell execution.

Operating expenses, however, increased sharply to ₹2,130 crore in Q4 FY26. The CFO attributed the spike largely to non-recurring items, mainly PSLC costs and technology expenditures. Management quantified roughly ₹60 crore higher PSLC cost versus the previous quarter and about ₹50 crore higher IT expenses.

Guidance and management commentary: ROA target remains ambitious but unchanged

Management reiterated a set of forward-looking targets during the call:

• Credit growth guidance of around 14% to 15%
• ROA aspiration of about 1.6% to 1.7% by Q4 FY27, with a tolerance of about 10 bps
• NIM improvement expectation of 10 to 20 bps over the next 2 to 3 quarters from the Q4 level
• A secured mix target of 58% by FY27 exit, with management noting the bank is already near the target

On risks, management explicitly flagged uncertainty from external shocks, including potential macro impacts from geopolitical conflict. The call also discussed RBI’s expected credit loss framework. The CFO stated an estimated transition impact of about ₹1,250 crore based on the December 2025 portfolio, to be spread over five years, while noting that the final implications were still being assessed.

Digital and distribution: high digital usage, plus product refresh

Bandhan Bank continued to present itself as a scaled retail franchise with deep distribution. As of March 2026, it operated 1,955 branches and 4,400 EEB banking units across 35 states and union territories. The bank reported 31.8 million customers.

Digital usage metrics remained high. The investor deck stated that 98% of retail transactions were digital and 93% of savings accounts were opened digitally. The bank also showcased product initiatives such as mBandhan 2.0 and a new retail internet banking platform, along with DIY onboarding journeys including video KYC.

Key takeaways

Bandhan Bank’s Q4 FY26 performance showed tangible improvement on the parameters investors typically watch most closely for the franchise: collections, slippages, credit cost, and margins. The quarter also reinforced the strategic direction of shifting towards a higher secured mix while building a more granular retail deposit base.

At the same time, FY26 results remind investors that the recovery is still in progress. Full-year profitability remains subdued, cost ratios remain elevated, and regulatory transitions like ECL could create moving parts. The bank’s near-term narrative hinges on sustaining EEB stability, continuing to improve funding costs, and delivering on the ROA path management has reiterated for FY27 exit. */