What’s the reason behind Bandhan Bank selling over ₹6,900 crore in stressed assets

In a significant move to clean up its balance sheet, Bandhan Bank Ltd. recently announced plans to sell non-performing assets (NPAs) and written-off loans totalling a massive ₹6,931.31 crore. The decision was approved by the bank’s board of directors in a meeting held on November 27, 2025, which lasted nearly ten hours, signaling the importance of the deliberations. According to a regulatory filing to the BSE and the National Stock Exchange (NSE), the bank will offload these stressed assets through a competitive bidding process with Asset Reconstruction Companies (ARCs) and other permitted transferees.

The sale is split into two distinct portfolios:

1. NPA Portfolio: The bank will sell identified NPAs that are more than 180 days past due, with a principal outstanding of ₹3,212.17 crore as of September 30, 2025. This portfolio will be sold using the Swiss Challenge method, a transparent bidding process where an initial bid is challenged by counter-bids to ensure the best price for the bank.
2. Written-off Portfolio: A separate written-off loan portfolio, with a principal outstanding of ₹3,719.14 crore as of September 30, 2025, will be sold via an auction route.

The stressed loans primarily belong to two of the bank’s key segments: the Emerging Entrepreneurs Business (EEB)—which includes group loans and small business & agricultural loans—and the Aspiring Business Group (ABG). These segments have historically been a core focus for the Kolkata-based lender but have also contributed significantly to its asset quality challenges in recent quarters.

Status of bank’s asset quality

In its earnings call recently, Bandhan Bank informed investors that the bank’s gross NPA ratio was at 5.0%, while net NPA was at 1.4% at the end of September 2025 quarter.

Slippages were elevated, particularly in the Emerging Entrepreneurs Business (EEB or microfinance) segment. Gross slippages for the entire bank were ₹1,590 crore in Q2, up from ₹1,553 crore in Q1. Of this, ₹1,118 crore came from the EEB portfolio.

The management acknowledged that stress in the EEB segment is taking longer to subside than anticipated and may continue for another 1-2 months. They attributed a significant increase in the SMA-0 (1-7 days past due) bucket (from ₹1,009 crore to ₹1,582 crore) largely to a “holiday effect.” Due to holidays at the end of September, collections were impacted, causing a temporary bulge. They reported that about ₹350 crore of this had already been recovered in October.

The long-term guidance for credit costs (a key metric driven by NPAs) is to bring it down to 1.5%-1.6% for the overall bank by the exit of FY27.

Write-offs

The bank undertook technical write-offs amounting to ₹865 crore during the quarter (Q2 FY26). The vast majority of this, ₹799 crore, was from the struggling EEB portfolio. These write-offs are a key reason why the gross and net NPA ratios remained stable despite high fresh slippages. The Provision Coverage Ratio (PCR), including technical write-offs, improved slightly to 87.6%.

Recoveries and Upgrades

The bank reported that recoveries and upgrades at the overall bank level stood at ₹332 crore for the quarter, a marginal improvement from ₹319 crore in the previous quarter. Collection Efficiency remained robust at 98.0% for the overall bank (excluding NPAs) and 97.8% for the EEB portfolio. The management specifically cited the rapid recovery of ₹350 crore from the holiday-impacted SMA-0 pool as evidence that the collection machinery is effective and that the spike was temporary.

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