A. Global and Indian Economic Scenario

Global economy - uneven growth prospects amid heightened uncertainty

In 2025, the global economy exhibited a stable overall performance, though this stability masked a range of contrasting underlying forces. According to the World Economic Outlook (WEO) July 2026 report, the International Monetary Fund (IMF) forecasts global Gross Domestic Product (GDP) growth at 3.0 per cent. In 2026, and 3.4 per cent. In 2027, down from the average of 3.5 per cent. observed in FY2024-25, indicating a gradual and measured recovery trajectory. Challenges arising from evolving trade policies and elevated uncertainty were counterbalanced by strong momentum from technology-driven investments, particularly in Artificial Intelligence (AI), alongside supportive fiscal and monetary policies and generally accommodative financial conditions. However, the global economy now faces renewed disruption, stemming from the outbreak of conflict in the Middle East at the end of February 2026.

Global inflation is expected to pause its steady decline and is projected to rise from 4.1 per cent. In 2025 to 4.7 per cent. In 2026 before easing to 3.9 per cent. In 2027, with the increase for 2026 driven mainly by higher energy and food prices. Inflation trends are likely to vary across economies, driven by differences in exchange-rate transmission, the sustained strength of services inflation, labor market conditions, and the increasing influence of country-specific factors. In several major economies, core inflation is projected to decline towards central bank targets only gradually. It is expected to reach target levels by mid-2027 in the United Kingdom (UK), by late 2027 in both Japan and the United States (US), and not until 2028 in the Euro Area. In China, inflation is anticipated to edge higher from its currently subdued levels.

The escalation of conflict in the Middle East has triggered a shift towards risk aversion, resulting in a moderate tightening of global financial conditions, although they remain accommodative by historical standards. Concerns regarding a potential resurgence in inflation have led to rising bond yields and declining equity market valuations. Emerging markets, particularly commodity-importing economies and those with existing structural vulnerabilities, have been disproportionately affected. Meanwhile, the US dollar has appreciated modestly, reinforcing its role as a safe haven currency. Despite these developments, overall market volatility has remained relatively contained, although geopolitical tensions and other factors have contributed to significant fluctuations in safe haven assets.

Global public debt dynamics showed little improvement in 2025, and the onset of conflict in the Middle East has introduced an additional layer of fiscal pressure to an already constrained environment. According to the IMF Fiscal Monitor April 2026 report, global gross government debt reached approximately 94 per cent. of GDP in 2025 and, if current trends persist, is expected to rise to 100 per cent. by 2029, a level previously observed only in the aftermath of World War II. A key concern lies not only in the elevated debt levels but also in the projected trajectory under existing fiscal policies. The same IMF report highlights a sharp increase in interest payments, which have risen from 2 per cent. to nearly 3 per cent. of global GDP within just four years, as governments refinance debt at higher prevailing interest rates.

Recent advancements in AI, particularly the emergence of agentic AI, present the potential for substantial productivity enhancements. However, the transition may not be without challenges. There have been concerns regarding market optimism surrounding these technologies may have outpaced underlying fundamentals, raising the possibility of future price corrections. Additionally, rapid technological change could also result in creation of new job profiles while putting some of the current ones at risk.

Climate change continues to pose significant risks to the global economy, with leading institutions emphasizing the urgency of the issue. The United Nations Environment Programmes Emissions Gap Report 2025 projects that global temperatures are likely to exceed 1.5°C above pre-industrial levels within the next decade. Key contributing factors include the expansion of middle-income populations in emerging markets and the rapid growth of energy-intensive AI infrastructure. Projections indicate that by 2030-2035, data centres alone could account for up to 20 per cent. of global electricity consumption, placing considerable strain on already stressed power systems. Taken together, these developments highlight the critical need for coordinated international action to mitigate climate risks and strengthen adaptation measures to ensure long-term economic resilience.

Indian economy - remains steady amid heightened uncertainty elsewhere

The revised national accounts, incorporating the updated base year of FY2022-23, confirm the sustained strength of domestic economic activity during FY2025-26. As per the National Statistical Office (NSO), real GDP growth for FY2025-26 is estimated at 7.7 per cent., reflecting an improvement over the 7.1 per cent. recorded in FY2024-25. This acceleration in growth has been primarily driven by robust expansion in Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF), which registered increases of 7.7 per cent. and 8.2 per cent., respectively.

Private consumption continued to serve as the dominant component of aggregate demand during the year, with PFCE growth rising by nearly 2 percentage points in FY2025-26 from 5.8 per cent. In the previous two fiscal years. Consumption demand continues to be supported by strengthening conditions in both rural and urban areas, aided by measures such as rationalisation of Goods and Services Tax (GST) rates and accommodative monetary policy. Nevertheless, latest consumer confidence survey by Reserve Bank of India (RBI) displayed signs of moderation in March 2026, after showing improvement for much of the year, indicating concerns over potential spill-over effects from persistent external uncertainties.

Capital formation remained on a steady trajectory, supported by favourable financial conditions and ongoing structural reforms. Although investment activity showed some softness in the first quarter of FY2025-26, momentum regained considerable strength in the subsequent later quarters. As per early estimates, capacity utilisation of the manufacturing sector at 75.2 per cent. in Q4 FY2025-26 remains above the long-term average of 74.0 per cent., indicating strengthened industrial momentum.

Government consumption expenditure continued to provide support to overall economic growth, even as fiscal consolidation efforts progressed. For FY2026-27, the budget estimates further reduction in the Gross Fiscal Deficit (GFD) to 4.3 per cent. of GDP from 4.8 per cent. in FY2024-25, reaffirming the commitment to fiscal discipline.

Despite persisting external headwinds, Indias merchandise exports demonstrated resilience, while services exports continued to perform strongly, thereby providing support to external demand. According to the RBI data, the overall trade deficit (goods and services) widened to USD 120.7 billion in FY2025-26, compared to USD 98.1 billion in the previous year. This deterioration was primarily due to import growth (6.5 per cent.) outpacing the growth in exports (4.6 per cent.).

In summary, domestic demand conditions were bolstered by policy measures such as GST rationalisation, direct tax cuts, accommodative monetary policy, benign inflation, ongoing structural reforms, and improving employment trends. However, net external demand exerted a drag on growth amid an uncertain and volatile global environment. From the supply side, growth in gross value added was driven by a strong services sector alongside a gradual strengthening in industrial activity. Looking ahead, progress in trade agreements with key global partners is expected to enhance Indias growth prospects. At the same time, risks persist due to geopolitical tensions, elevated commodity prices, and disruptions in global supply chains. Policy initiatives aimed at securing alternative sources for critical inputs are anticipated to mitigate the adverse effects arising from geopolitical developments, particularly those linked to the West Asia region.

B. Indian Banking Sector: Key Developments

Indian Banking Sector: Robust and healthy

During FY2025-26, deposits grew at 13.5 per cent. year-on-year, tad behind the credit offtake which grew at 16.1 per cent. The gap between yearly growth of credit and deposits in a Financial Year widened from approx. 74 bps in FY2024-25 to 260 bps in FY2025-26. Consequently, the Credit-to-Deposit (CD) ratio stood at 81.4 per cent. from 80.8 per cent. in the previous year for all Scheduled Commercial Banks (SCBs).

Overall credit growth accelerated in FY2025-26 as compared to the previous year. The growth drivers in the bank credit were broad-based. Having said that, technical tweak in reporting of fortnightly balance sheet data has also led to some swelling of credit growth in FY2025-26.

a. Personal Loans (Retail Loans incl. Housing Loans) growth accelerated to 16.2 per cent. in the FY2025-26 from 11.7 per cent. in the previous Financial Year, Housing and Gold Loans remained robust at 11.5 per cent. and 123.1 per cent., respectively, against 10.7 per cent. and 103.5 per cent., respectively, in the previous year. Gold Loans, in fact with roughly 2 per cent. credit share, has contributed roughly 26 per cent. of the incremental retail credit growth in FY2025-26. Housing credit has contributed 36 per cent. of the incremental growth in personal loans.

b. Credit growth to services sector rose by 19.0 per cent. in FY2025-26 as compared to 12.0 per cent. in FY2024-25. Within the services sector, Non-Banking Financial Companies (NBFCs) remained the largest recipient of bank credit, with lending to them improving following the withdrawal of the additional risk weights effective April 1, 2025. Credit to services excluding NBFCs also expanded at a steady pace. Segments such as trade and commercial real estate recorded robust growth.

c. Credit growth related to Agriculture and allied activities also remained robust at 15.7 per cent. as compared to 10.4 per cent. in the previous year.

d. Industrial credit continued to expand at a robust pace of 15.0 per cent. in FY2025-26. Lending to micro and small enterprises witnessed a significant acceleration, growing by 33.1 per cent., while credit to medium and large industries remained steady at 21.7 per cent. and 8.9 per cent., respectively. Notably, micro and small enterprises accounted for the largest share of incremental industrial credit in FY2025-26, marking the highest contribution since the COVID period. The sustained flow of credit to the MSME sector was facilitated by several regulatory initiatives, including the enhancement of limits under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, the introduction of a tailored credit card scheme for micro enterprises, the expansion of digital and fintech-based lending through bank-led co-lending frameworks, and the revised definition of MSMEs, among other measures.

Sector	Growth (year-on-year) FY2025-26	Growth (year-on-year) FY2024-25
Agriculture & allied activities	15.7%	10.4%
Industries	15.0%	8.2%
I. Micro and Small	33.1%	8.9%
II. Medium	21.7%	18.5%
III. Large	8.9%	6.9%
Services	19.0%	12.0%
Personal	16.2%	11.7%

e. As per the Financial Stability Report (FSR) of RBI (June 2026), Gross Non-Performing Asset (GNPA) ratio of SCBs fell to a multi-decadal low of 1.8 per cent. In March 2026 whereas the Net Non-Performing Assets (NNPA) ratio remained at a record low of 0.4 per cent. At the aggregate level, the Liquidity Coverage ratio (LCR) and Net Stable Funding Ratio (NSFR) of SCBs moderated to 124.2 per cent. and 122.1 per cent., respectively, though all bank groups continued to maintain liquidity buffers well above the respective regulatory minimum levels.

f. Supported by higher credit volumes, growth in Net Interest Income (NII) of SCBs recorded a modest improvement of 4.0 per cent. year-on-year in March 2026. The growth in profit of SCBs slowed in March 2026, as indicated by Profit After Tax (PAT) growth at 7.2 per cent. compared to double digit growth in FY2023-24 and FY2024-25.

Potential threats

Spill-overs from external sectors - The West Asia war has disrupted global energy supplies and have resulted in heightened price rise across crude and gas segments. With India getting 40 per cent. and 60 per cent. of its crude and natural gas imports, respectively, from the Strait of Hormuz, higher persistent energy prices could widen Current Account Deficit (CAD) while adversely impacting growth-inflation dynamics. This poses downside risks for multiple sectors - directly impacting credit growth and potentially increasing slippages. As in 2025, heightened global uncertainties linked to policy and trade continue to remain a critical headwind and have the potential to interact with existing vulnerabilities and amplify adverse shocks, which could also be a drag to Indias export-linked credit demand.

Financialization of savings - In recent years, alternative financial instruments like mutual funds, equities, and insurance-linked products have gained traction - driven by rising financial literacy, digital investment platforms, and strong post-pandemic capital market returns. This could result in drawing funds away from CASA balances towards these market-linked alternatives, impacting system level deposit growth. Hence, banks would be required to innovate their liability products and offer competitive, inflation-adjusted returns to attract household savings.

Disruptive Technologies - The rapid evolution of AI and Machine Learning (ML) is fundamentally altering the financial services landscape, posing a significant threat to traditional banking. These technologies enable new entrants- often leaner, digital-native, and more agile- to deliver financial products with unprecedented speed, personalization, and efficiency. In response, the RBI has constituted an AI governance committee mandating explainability, audit trails, and data localisation - signalling that technology risk management is now central to prudential oversight. Traditional banks need to adapt quickly and redefine their role in a tech-first financial environment to avoid the risk of losing control.

Climate Risks - Climate-related events have evolved from isolated occurrences to systemic threats with direct implications for the stability and resilience of the Indian banking industry. Physical risks - including floods, droughts, and extreme heat events - increasingly impair borrower repayment capacity, thereby pressuring banks asset quality and provisioning norms. Transition risks, arising from policy shifts and market realignments towards a low-carbon economy, carry the potential to devalue carbon-intensive assets and fundamentally alter the credit landscape for banks. It is therefore imperative for banks to proactively integrate climate resilience into their credit underwriting, enterprise risk management, and governance frameworks, rather than treat it as a peripheral disclosure exercise.

Cybersecurity related risks - The cybersecurity threats are evolving, driven by rapid technological change and increasing sophistication of the threats. Phishing attacks, ransomware, and AI-powered fraud schemes are increasingly targeting retail customers, UPI ecosystems, and core banking infrastructure. In this context, regulatory mandates from the RBI - including directives on IT risk governance, cyber resilience frameworks, and incident reporting - are compelling banks to significantly strengthen their cybersecurity postures and invest in real-time threat intelligence capabilities. With focus on cyber-security and customer protection, the RBI had also constituted a Working Group on Digital Lending including lending through Online Platforms and Mobile Apps.

C. Strategy

Your Bank stands at an important point in its evolution, having completed a decade of building a differentiated and trusted banking franchise rooted in financial inclusion, customer-centricity and disciplined execution. Over the years, your Bank has established a strong foundation of resilience, operational scale and customer trust across geographies. Building on this foundation, your Bank is continuing its progress towards the next phase of its journey under the broader vision of "Bandhan 2.0" - a forward-looking roadmap aimed at positioning the institution as a diversified, digitally advanced and future-ready universal bank. The strategy reflects a calibrated balance between continuity and transformation, combining its inclusive heritage with the sophistication, governance standards and technological depth required in a rapidly evolving banking landscape.

Your Bank remains focused on strengthening its presence across geographies and customer segments while preserving the quality and stability of its balance sheet. The strategic emphasis is on expanding the share of business from non-eastern geographies, deepening penetration in metro and urban markets, and broadening relationships across retail, MSME, agri-allied and emerging customer segments, while continuing to maintain its strong connect with rural and semi-urban India. Through calibrated vertical and horizontal expansion, your Bank aims to create a more diversified and balanced business franchise that is resilient across economic cycles and capable of delivering sustainable long-term growth.

A strong risk and governance framework continues to remain central to your Banks growth philosophy. Your Bank has further strengthened its enterprise-wide risk management architecture through enhanced credit appraisal standards, sharper portfolio monitoring frameworks, stronger recovery and collection mechanisms, and continued investments in governance and compliance capabilities. Your Bank remains committed to embedding a prudent and risk-calibrated approach across businesses, ensuring that growth is supported by robust underwriting discipline, strong oversight mechanisms and responsible capital allocation. This emphasis on governance, compliance and risk management forms the bedrock of your Banks strategy and supports long-term balance sheet resilience.

At the same time, your Bank continues to focus on strengthening its liability franchise and improving overall balance sheet quality. The strategic focus remains on building a granular and stable deposit base through deeper customer engagement, stronger relationship banking and differentiated product offerings aligned with evolving customer preferences. By driving growth in retail deposits and enhancing customer stickiness, your Bank aims to improve funding resilience, support sustainable asset growth and maintain a balanced liquidity profile. In parallel, your Bank is also focusing on improving capital efficiency and increasing the contribution of fee and other non-interest income streams through initiatives across transaction banking, payments, distribution and customer-led service propositions.

Your Bank is simultaneously undertaking a systemic transformation across people, process and technology to improve organisational effectiveness and execution capability. Your Bank continues to drive sharper accountability through KPI-led performance frameworks, streamlined decision-making structures and stronger alignment between strategic priorities and execution outcomes. By simplifying processes, improving operational efficiency and leveraging data driven monitoring frameworks, your Bank aims to enhance productivity, accelerate decision velocity and create a more agile and responsive organisation capable of adapting to a rapidly changing operating environment.

Digital transformation remains a key pillar of your Banks long-term strategy. Your Bank continues to invest in modernising its digital infrastructure, strengthening technology and AI capabilities and redesigning customer journeys to deliver seamless and intuitive banking experiences. The establishment of dedicated functions such as the Digital and Transaction Excellence Unit (DTEU) and Customer Experience (CX) reflects your Banks strategic commitment towards building a technology-led institution. Through the integration of advanced technologies including AI and Machine Learning, your Bank aims to augment customer engagement, improve service delivery, strengthen operational efficiency and provide contextual, need-based and personalised banking experiences across channels. Your Bank is progressively moving towards a more frictionless and intelligent banking model that combines the strength of physical distribution with digital innovation.

Your Bank also recognizes that people and culture remain fundamental to the successful execution of its strategic agenda. Accordingly, it continues to invest in leadership development, capability building, employee engagement and performance-oriented human capital practices. Your Bank is committed to fostering a culture of accountability, ownership, meritocracy and continuous learning, enabling employees across levels to contribute meaningfully towards institutional growth. These initiatives are aimed at building a future-ready workforce, strengthening organisational capabilities and developing the next generation of leaders required to navigate an increasingly dynamic banking environment.

Beyond business priorities, your Bank remains deeply committed to its broader socio-developmental responsibilities through its CSR initiatives under "Empower". Your Bank continues to undertake focused interventions across education, healthcare, livelihood generation, climate action, skill development, financial literacy and community development. These initiatives reflect your Banks belief that sustainable institutional growth must remain aligned with broader social progress and inclusive economic development.

Your Banks strategy represents a thoughtful blend of modernization, diversification and mission continuity. While embracing technology, innovation and organisational transformation to remain competitive in a rapidly evolving financial ecosystem, your Bank continues to remain anchored to its founding principles of trust, inclusion and responsible banking. Through sustained investments in digital capabilities, governance frameworks, human capital and customer-centric growth, your Bank is positioning itself to emerge as a resilient, agile and future-ready institution capable of creating durable long-term value for its customers, employees, Shareholders and the communities it serves.

4. Financial Performance

The financial highlights for the Financial Year under review are presented below:

Summary of Financial Performance

Particulars	For the Financial Year ended March 31, 2026	For the Financial Year ended March 31, 2025
Deposits	1,66,344.45	1,51,212.50
Advances (Net)	1,50,103.78	1,31,987.32
Total Assets/Liabilities	2,11,123.73	1,91,476.29
Net Interest Income	10,829.69	11,490.58
Non-Interest Income	2,734.02	2,966.60
Less: Operating Expenses (excluding depreciation)	7,394.63	6,789.29
Profit before Depreciation, Provisions and Tax	6,169.08	7,667.89
Less: Depreciation	304.16	279.20
Less: Provisions	4,131.11	3,765.41
Profit Before Tax (PBT)	1,733.81	3,623.28
Less: Provision for Tax	510.25	877.98
Profit After Tax (PAT)	1,223.56	2,745.30
Balance in Profit & Loss Account brought forward from previous year	10,227.51	8,679.13
Amount available for appropriations	11,451.07	11,424.43
Less: Appropriations	577.13	1,196.92
Balance carried over to Balance Sheet	10,873.94	10,227.51
EPS (Basic) (in \u20b9)	7.60	17.04
EPS (Diluted) (in \u20b9)	7.59	17.04

Key Ratios

Particulars	FY2025-26	FY2024-25
Fee to total income	11.19%	11.91%
Cost to income	56.76%	48.89%
Earnings per share	\u20b9 7.60	\u20b9 17.04
Book value per share	\u20b9 153.62	\u20b9 145.32
Return on average assets	0.64%	1.53%
Return on average net worth	4.85%	11.57%
Operating Profit to Average Total Assets	3.06%	4.13%
Net Interest Margin	6.08%	7.07%
Capital Adequacy Ratio (including profits)	18.04%	18.71%
Gross NPA	3.27%	4.71%
Net NPA	0.97%	1.28%

The financial performance of your Bank during the Financial Year ended March 31, 2026, remained steady with the Total Net Revenue (Net Interest Income Plus Other Income) of ?‚?13,563.71 Crore during the FY2025-26. Net Interest Income for FY2025-26 stood at ?‚?10,829.69 Crore, decline of 5.8 per cent. over previous year, on account of moderation in Net Interest Margin (NIM) led by continued expansion of secured book and impact of the repo rate cut. The NIM was 6.1 per cent. during FY2025-26 against 7.1 per cent. during the FY2024-25.

Operating (Non-Interest) Expenses increased to ?‚?7,698.79 Crore from ?‚?7,068.50 Crore during FY2025-26. The cost to income ratio increased to 56.8 per cent. for FY2025-26 as against 48.9 per cent. for FY2024-25, primarily driven by increase in cost to support the business growth, regulatory cost like Priority Sector Lending Certificates and strategic investment in manpower and technology, lower net total income on account of lesser ROI due to repo reduction by RBI, and one-time claim amounts received from National Credit Guarantee Trustee Company Limited in previous year, etc. During the Financial Year under review, your Bank has set up 240 new branches (including conversion of Housing Finance centres into branches) whereas employee strength stood at 75,397 at the end of March 31, 2026.

The Profit After Tax (PAT) for FY2025-26 stood at ?‚?1,223.56 Crore. Consequently, the Return on Average Equity (ROAE) was 4.8 per cent. and Return on Average Asset (ROAA) was 0.6 per cent. for FY2025-26. The basic and diluted Earnings Per Share (EPS) were ?‚?7.60 and ?‚?7.59, respectively, for FY2025-26. Improvement in the NPA ratios reflects improvement in the asset quality of your Banks portfolio while maintaining comfortable capital adequacy ratio.

Reflecting on steady growth in the balance sheet, Total Liabilities (including capital and reserves) increased by 10.3 per cent. from ?‚?1,91,476.29 Crore as on March 31, 2025, to ?‚?2,11,123.73 Crore as on March 31, 2026, whereas Total Advances (Net) stood at ?‚?1,50,103.78 Crore, a growth of 13.7 per cent. over FY2024-25. Total Business of your Bank increased by 11.2 per cent. to ?‚?3,20,578 Crore [Gross Advances: ?‚?1,54,233 Crore (including Pass-Through 1,66,344 Crore as on March 31, 2026] from previous year of ?‚?2,88,207 Crore [Gross Advances: ?‚?1,36,995 Crore (including PTC of ?‚?265 Crore) and Deposits: ?‚?1,51,212 Crore as on March 31, 2025]. The Total Provisions and Contingencies (including tax provisions) was ?‚?4,641.36 Crore as compared to ?‚?4,643.39 Crore in FY2024-25.

Priority Sector Lending and Investment

RBI has mandated Priority Sector Lending (PSL) of 40 per cent. of advances for all the banks. Your Bank continues to focus on financial inclusion by providing various financial services to the underserved. Your Banks PSL was ?‚?67,120.44 Crore as on March 31, 2026 and PSL as a proportion of preceding years Adjusted Net Bank Credit (ANBC) of ?‚?1,55,268 Crore was 43.22 per cent.

E. Disclosures relating to Internal Financial Control, Business Segment Wise Performance, Risk and Concerns, Development in Human Resources and Disclosure of Accounting Treatment for the Financial Year ended March 31, 2026, forms part of the Boards Report.

For and on behalf of the Board of Directors Bandhan Bank Limited

Partha Pratim Sengupta Managing Director & Chief Executive Officer (DIN: 08273324)

Rajinder Kumar Babbar Executive Director & Chief Business Officer (DIN: 10540386)

Ratan Kumar Kesh Executive Director & Chief Operating Officer (DIN: 10082714)