Bandhan Bank aims to expand home loan portfolio in states having housing shortage

The bank’s growth agenda is getting bolder, backed by increased investor confidence in it.

Bandhan Bank, which is keen on building more diversified and secured loan book, is looking to expand its housing finance business in states that have major housing shortage, focussing on Rs 10-25-lakh loan amount bracket. Home loan products are now available in 302 banking outlets across the country, and the private sector bank will be ramping up the presence to cover a larger portion of its pan-India network of 4,559 banking outlets.

“Before Covid-19, we had planned to open around 65 new centres for home loan products in FY21. However, the final number will depend on how the pandemic situation unfolds over the next few months. Our philosophy has always been to start small, learn from experience and then scale up. We will adopt a similar approach with the housing finance business as well,” Bandhan Bank managing director and CEO Chandra Shekhar Ghosh told FE.

The bank’s growth agenda is getting bolder, backed by increased investor confidence in it. The bank’s holding company, Bandhan Financial Holdings (BFHL), raised around Rs 10,600 crore last week by selling its 20.95% stake in the lender to domestic and overseas investors. Investors include BlackRock, Singapore’s GIC, Temasek and SBI Mutual Fund. Through a secondary market sale, BFHL brought its shareholding in the bank to 40% to comply with licensing conditions of the Reserve Bank of India.

Ghosh said the future business prospects of its home loan business have not been much impacted due to the Covid crisis. “Purchase and repair of residential and commercial properties will continue to be a strong need. In the Covid scenario, this purchase will only get deferred by a few months since identifying the right property to buy requires physical movement and in-person meetings, which may not be possible due to Covid-19 and localised lockdowns. It is only after a house is selected that the need for a home loan arises,” he pointed out.

According to him, the fundamentals of the housing finance business remain strong. “The areas in which we are looking to expand, including Bihar, Odisha, West Bengal and Uttar Pradesh, are states that have major housing shortage, which means there will be future demand for affordable housing in these geographies,” he said.

At present, the bank’s average ticket size of home loans is Rs 9.5 lakh. “Our focus is clearly on the affordable segment and we will focus on the Rs 10 lakh – Rs 25 lakh bracket. But, we have also given home loans of higher ticket sizes, depending upon the borrowers’ creditworthiness and quality of asset,” Ghosh said.

In addition to this, the bank has also introduced a micro home loan product with an average loan size of Rs 5 lakh, which is focussed on the needs of its rural customers. Affordable housing finance firm Gruh Finance formally merged with Bandhan Bank in October last year. Bandhan believes Gruh was a strategic fit for it in terms of values, target audience, business objectives and vision. “Both Bandhan Bank and Gruh believe in providing timely credit access to those who may find it difficult to access loans from the broader financial system,” Ghosh emphasised.

The bank’s loan portfolio for the first quarter this fiscal grew 17.7% year-on-year. During the quarter, it added 2.1 lakh customers, with total customer base reaching to 2.03 crore.Bandhan Bank, which is keen on building more diversified and secured loan book, is looking to expand its housing finance business in states that have major housing shortage, focussing on Rs 10-25-lakh loan amount bracket.

Home loan products are now available in 302 banking outlets across the country, and the private sector bank will be ramping up the presence to cover a larger portion of its pan-India network of 4,559 banking outlets.

“Before Covid-19, we had planned to open around 65 new centres for home loan products in FY21. However, the final number will depend on how the pandemic situation unfolds over the next few months. Our philosophy has always been to start small, learn from experience and then scale up. We will adopt a similar approach with the housing finance business as well,” Bandhan Bank managing director and CEO Chandra Shekhar Ghosh told FE.

The bank’s growth agenda is getting bolder, backed by increased investor confidence in it. The bank’s holding company, Bandhan Financial Holdings (BFHL), raised around Rs 10,600 crore last week by selling its 20.95% stake in the lender to domestic and overseas investors. Investors include BlackRock, Singapore’s GIC, Temasek and SBI Mutual Fund. Through a secondary market sale, BFHL brought its shareholding in the bank to 40% to comply with licensing conditions of the Reserve Bank of India.

Ghosh said the future business prospects of its home loan business have not been much impacted due to the Covid crisis. “Purchase and repair of residential and commercial properties will continue to be a strong need. In the Covid scenario, this purchase will only get deferred by a few months since identifying the right property to buy requires physical movement and in-person meetings, which may not be possible due to Covid-19 and localised lockdowns. It is only after a house is selected that the need for a home loan arises,” he pointed out.

According to him, the fundamentals of the housing finance business remain strong. “The areas in which we are looking to expand, including Bihar, Odisha, West Bengal and Uttar Pradesh, are states that have major housing shortage, which means there will be future demand for affordable housing in these geographies,” he said.

At present, the bank’s average ticket size of home loans is Rs 9.5 lakh. “Our focus is clearly on the affordable segment and we will focus on the Rs 10 lakh – Rs 25 lakh bracket. But, we have also given home loans of higher ticket sizes, depending upon the borrowers’ creditworthiness and quality of asset,” Ghosh said.

In addition to this, the bank has also introduced a micro home loan product with an average loan size of Rs 5 lakh, which is focussed on the needs of its rural customers. Affordable housing finance firm Gruh Finance formally merged with Bandhan Bank in October last year. Bandhan believes Gruh was a strategic fit for it in terms of values, target audience, business objectives and vision. “Both Bandhan Bank and Gruh believe in providing timely credit access to those who may find it difficult to access loans from the broader financial system,” Ghosh emphasised.

The bank’s loan portfolio for the first quarter this fiscal grew 17.7% year-on-year. During the quarter, it added 2.1 lakh customers, with total customer base reaching to 2.03 crore.