Bandhan Bank Ltd Management Discussions

Annex 5

A. Global and Indian Economic Scenario

Global economy - slow recovery amid heightened uncertainty

The global landscape over the past year has remained fluid, shaped by geopolitical tensions, uneven inflation, varied market sentiments across the globe, and policy related uncertainties. According to the International Monetary Fund (IMF), global GDP growth is projected at 2.8 percent for 2025, lower than the previous years projection of 3.3 per cent.1, and is expected to remain rangebound for the foreseeable future, signalling a slow and steady recovery.

Regional divergences in inflation have become prominent over the past year. While United Statess (US) core inflation was forecasted at 2.8 per cent.2 for 2025, a rise of 30 bps from previous forecast due to recent changes in the tariff landscape, Eurozones inflation has eased out3 and is expected to stabilise.

While US exhibited resiliency in its growth story, China, traditionally a growth engine, experienced hiccups due to internal structural challenges such as a declining workforce and a real estate slump. Chinas GDP estimates were revised downwards to 4.0 per cent4, for both - 2025 and 2026 - from previous projections of 4.6 percent and 4.5 percent for 2025 and 20265, respectively. Additionally, Eurozones growth forecast at 0.8 per cent6. in 2025 faced challenges from uncertain global trade policies. Similarly, emerging economies have also experienced downgrades due to intensifying downside risks such as currency volatility, geopolitical risks, among others. India, while remaining a major growth driver globally, also hit a four-year low of 6.5 per cent growth in FY 2024-25, slowed down from 9.2 per cent.7, growth recorded in FY 2023-24.

Global economic and trade policies are in a period of transition, shaped by competing priorities: national security vs. globalisation, sustainability vs. growth, and inflation control vs. economic stimulus. The trajectory of global growth in the coming years will depend on how effectively policymakers balance these competing priorities. Economies are increasingly expected to realign themselves towards bilateral treaties from multilateral arrangements to balance growth objectives and policy uncertainties.

In addition, driven by Artificial intelligence (AI), global technology landscape has undergone a tectonic shift. Advancements in AI, quantum computing and the rise of decentralised technologies have created a new digital paradigm that is redefining industries, economies, and societies at an unprecedented pace. Large scale adoption of Generative AI, in particular, is reshaping how businesses operate and differentiate themselves. As innovation cycles shorten and disruption becomes the norm, economies that identify and adopt these emerging technologies early, are expected to be at the centre of global influence.

Climate change poses significant threats to the global economy, with major institutions highlighting escalating risks. The Organisation for Economic Co-operation and Development (OECD) warned that without intensified climate action, global GDP could decline by up to 4 per cent. annually by 2100 due to sea-level rise and extreme weather events. The World Bank highlighted that 1.2 billion people are at high risk from climate hazards. Collectively, these findings underscore the urgent need for coordinated global action to mitigate climate risks and invest in adaptation strategies to safeguard economic stability.

Indian economy - continues to remain steady amid heightened uncertainty elsewhere

Indias economy has demonstrated resilience amid global uncertainties and is expected to maintain steady growth in the future. As per the recent estimates, Indias GDP growth for FY 2024-25 was at 6.5 per cent. with Q4 FY 2024-25 exhibiting a growth of 7.4 per cent8. amid global uncertainties. The steady growth has been supported by robust domestic consumption, industrial activity, rural demand and government spending.

Consumer price index (CPI) inflation is expected to moderate from 4.9 per cent9., in FY 2024-25 to below 4.5 per cent. over the next year, aided by prudent monetary policy. Favourable monsoon forecasts, better kharif sowing and healthy reservoir levels are expected to boost agricultural output and stabilise inflation further.

Despite external challenges, Indias macroeconomic fundamentals remain strong. Government infrastructure spending and a robust services sector continue to underpin economic stability, positioning

India favourably compared to other major economies.

Rural sector rebounds after a period of softness

Indias rural economy rebounded in FY 2024-25, with agricultural growth estimated at 4.6 per cent., up from 2.7 per cent.10, in previous year, and is expected to exhibit similar growth in the coming year, aided by above-average monsoon forecasts and increased rural spending. Rural consumption has recovered from the Covid shock and is likely to stay resilient due to wage growth and subsequently the rising demand. Rural wage growth, adjusted for inflation, is at its highest in the past few years. Being the largest contributor to the overall consumption, rural sector continues to play pivotal role in Indias economic growth story.

Consumption and investments remained steady

Indias economy has maintained steady consumption and investment levels in FY 2024-25, as estimated during the year showing economic resiliency. Private final consumption expenditure accounts for 56.5 per cent. of GDP, while gross fixed capital formation contributes 33.7 per cent.11, reflecting robust domestic demand and investment activity. Additionally, the Governments capital expenditure is set at a record ^11.21 lakh crore12, for FY 2025-26, underscoring a strong commitment to consumption growth and infrastructure development.

B. Indian Banking Sector:

Key Developments

Indian Banking Sector: Robust and healthy

During FY 2024-25, deposits grew at 10.7 percent. year- on-year, tad behind the credit offtake which grew at 11 per cent. The gap between yearly growth of credit and deposits in a financial year narrowed down from approx. 340 bps in FY 2023-24 to 30 bps in FY 202425. Consequently, the credit-to-deposit (CD) ratio remained elevated above 80 per cent. from 79.7 per cent. in the previous year for all Scheduled Commercial Banks (SCB)13.

Overall credit growth decelerated in FY 2024-25 as compared to the previous year. The growth drivers in the credit changed from previous year with loans to medium industries growing at the highest rate, followed by micro & small14 :

a. Personal Loans (Retail Loans incl. Housing Loans) growth decelerated to 14.0 per cent. in the FY 2024-25 from 17.6 per cent. in the previous financial year, due to concerns of over-leveraging in unsecured lending i.e. Other Personal Loans, Credit Cards, Education Loans and Consumer Durables. On the other hand, growth in secured personals loans i.e., Housing and Gold Loans remained robust at 15.3 per cent. and 103.5 per cent., respectively against 17.1 per cent. and 14.8 per cent., respectively in the previous year.

b. Credit growth to services sector fell to 13.4 per cent. in FY 2024-25 from 20.8 per cent. in the previous year, due to drag in the credit to

Commercial Real Estates, NBFCs and Aviation.

c. Credit to Agriculture and allied activities halved in the FY 2024-25 from previous year.

d. Industry credit growth remained consistent at 8.0 per cent., in FY 2024-25. Credit growth to micro and small industries decelerated to 9.0 per cent. while credit to medium industries accelerated to

18.6 per cent. and remained at constant level for large industries at 6.2 per cent.

Sector	Growth (year- on-year)
	FY24-25	FY23-24
Agriculture & allied activities	10.4%	20.0%
Industries	8.0%	8.0%
I. Micro and Small	9.0%	14.7%
II. Medium	18.6%	13.3%
III. Large	6.2%	6.4%
Services	13.4%	20.8%

e. As per the Financial Stability Report (FSR) of RBI (June 2025), Gross Non-Performing Asset (GNPA) ratio of SCBs fell to a twelve-year low of 2.3 per cent. in March 2025 whereas the Net Non-Performing Assets (NNPA) improved to 0.5 per cent.

f. The Liquidity Coverage Ratio (LCR) was comfortably at 132.6 per cent. as on March 2025 above minimum requirement of 100 per cent. across bank groups. It was the highest among foreign banks followed by public sector banks and private banks.

g. Profit after tax (PAT) of SCBs increased by 16.9 per cent. year-on-year in FY 2024-25. Public sector banks showed highest jump in PAT of 31.8 per cent. year-on-year followed by private banks at 9.2 per cent.

Potential threats

Cybersecurity and Digital Fraud - The cybersecurity threats are evolving, driven by rapid technological change and increasing sophistication of the participants. Simple phishing attacks are now evolving into highly coordinated attacks involving deepfakes and AI, among others. At the same time, the growing sophistication of AI-driven fraud and cyberattacks exposes vulnerabilities in banks traditional security frameworks. The targets broadened from only customers previously to also include banking infrastructure and digital channels now, leading to financial and reputational risks. Banks, thus need to invest in advanced security measures and collaborate with regulatory bodies to strengthen their cyber defences and protect against these evolving threats.

Credit Risk and Household Debt - The surge in unsecured lending and the delinquencies in the segment raised concerns about borrowers repayment capacities. RBIs intervention to increase the risk weight of the unsecured loans hints at the wider concern. Banks need to closely monitor credit risk and implement stricter lending criteria to mitigate potential defaults and maintain financial stability within the sector.

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, personalisation, and efficiency. As customer expectations shift towards real-time, intuitive services, conventional banks risk falling behind due to legacy infrastructure, rigid processes, and slower innovation cycles. 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 - Events related to climate change are no longer isolated. Rather, they have increasingly become a systemic threat to the stability and resiliency of the banking industry. These pose threat to the borrowers credit worthiness, which puts pressure on banks asset quality and provisioning norms. Banks with high exposure to carbon-intensive industries may suffer from loss of asset value and credit related challenges. Additionally, regulatory push towards climate-related financial disclosures and ESG integration may add to the operational cost for banks in the near term. It is thus imperative for banks to integrate climate resilience into their strategy, underwriting, and governance practices to maintain sustainable business operations.

Absence of Diversity Equity and Inclusion (DEI) initiatives - The banking sector, while showing progress in DEI initiatives, still lags in equitable representation of communities and genders. Lack of diversity may result in homogeneous decision-making, limiting the industrys ability to innovate and respond effectively to rapidly evolving business environment. Failure to do so could result in a loss of competitive advantage, talent attrition, and diminished trust among increasingly socially conscious consumers.

C. Strategy

Your Bank has been undergoing a significant transformation over the last few years to position itself as a diversified, digitally advanced and customercentric financial institution. Over the last decade of service, your Bank has built a strong foundation of trust, resilience and customer-centric growth. Looking ahead, its committed to expand its reach both - in geography and in relationships. Your Bank aims to bring more individuals, businesses and communities in its fold while strengthening its presence across the country. It remains relentlessly focused on identifying growth opportunities and aims to achieve the same by increasing its share of business from non-eastern geographies, and enhancing its presence and outreach capabilities through its branches and ATMs. Your Bank aims to improve its presence among Metro and Urban population groups, notwithstanding its continued focus on rural and semi-urban areas.

Your Bank is poised well to scale up its businesses with strong emphasis on strengthening its internal capabilities, especially in terms of risk management and governance. It has further enhanced its credit appraisal and recovery mechanisms to improve its loan book resilience and repayment discipline. Simultaneously, your Bank remains committed to best-in-class compliance and governance practices that form the core of its risk management strategy.

Your Bank is embracing digital transformation to redefine the customer experience and enhance operational efficiency. It has been focusing on upgrading its digital infrastructure, integrating advanced technologies such as artificial intelligence and machine learning, and streamlining customer journeys across platforms. Setting up of two new functions - Digital and Transaction Excellence Unit (DTEU) and Customer Experience (CX) is testimonial to our unwavering focus. By leveraging advanced digital technologies, your Bank continues to align its services with the evolving preferences of digitally inclined and next-generation customers.

Your Bank also recognises that a skilled and motivated workforce is essential for executing its ambitious plans. To this end, it is investing in training, leadership development, and employee engagement initiatives. These programs are designed to cultivate a high- performance culture, a more productive workforce that aligns with your Banks broader strategic goals and fosters a sense of ownership and accountability among all the employees.

Your Banks performance is truly aligned to its defined strategy of quality, stability and diversification, across its business franchise. Your Bank is implementing systemic and systematic overhaul across people, process and technology, to further the Bandhan 2.0 journey. Your Bank has taken giant leaps in the business since inception and is focused at scaling it further in a rapid and sustainable manner through vertical and horizontal expansions.

Beyond banking, your Bank has consistently demonstrated a strong commitment to sociodevelopmental programs through its CSR initiative - Empower. These initiatives are designed to address various aspects of community development, including education, health, livelihood promotion, sustainable development, climate action, financial literacy, skill enhancement, and job creation. Your Bank is committed to contribute to the society through various targeted interventions in a strategic manner.

Your Banks forward-looking strategy represents a thoughtful blend of modernisation and mission continuity. While it embraces innovation and diversification to stay competitive, it also remains committed to its founding principles of inclusive finance. Through strategic investments in digital technology, geographic outreach, risk governance and human capital, your Bank is preparing itself for a future defined by resilience, agility, and long-term value creation.

D. Financial Performance of the Bank

The financial highlights for the financial year under review are presented below:

Summary of Financial Performance

(Rs. in Crore)

Particulars	For the financial year ended
	March 31, 2025	March 31, 2024
Deposits:	1,51,212.50	1,35,201.99
Advances (Net):	1,31,987.32	1,21,136.78
Total Assets/Liabilities	1,91,476.29	1,77,841.66
Net Interest Income	11,490.58	10,318.84
Non-Interest Income	2,966.60	2,171.42
Less: Operating Expenses (excluding depreciation)	6,789.29	5,613.20
Profit before Depreciation, Provisions and Tax	7,667.89	6,877.06
Less: Depreciation	279.20	237.58
Less: Provisions	3,765.41	3,696.57
Profit Before Tax (PBT)	3,623.28	2,942.91
Less: Provision for Tax	877.98	713.35
Profit After Tax (PAT)	2,745.30	2,229.56
Balance in Profit & Loss Account brought forward from previous year	8,679.13	7,453.78
Amount available for appropriations	11,424.43	9,683.34
Less: Appropriations	1,196.92	1,004.21
Balance carried over to Balance Sheet	10,227.51	8,679.13
EPS (Basic) (in Rs.)	17.04	13.84
EPS (Diluted) (in Rs.)	17.04	13.84

The financial performance of your Bank during the financial year ended March 31, 2025, remained healthy with the Total Net Revenue (Net Interest Income Plus Other Income) rising by 15.7 per cent. to 4,457.18 crore from Rs.12,490.26 crore during the previous financial year. Net Interest Income grew by 11.4 per cent. to 1,490.58 crore. The Net Interest Margin (NIM) was 7.1 per cent. during FY 2024-25 against 7.3 per cent during the FY 2023-24.

Operating (Non-Interest) Expenses increased to

Rs.7,068.50 crore from Rs.5,850.78 crore during FY 202425. During the FY under review, your Bank has set up 15 new branches. Employee strength stood at 75,032 at the end of March 31, 2025. The cost to income ratio increased to 48.9 per cent. for FY 2024-25 from 46.8 per cent. for FY 2023-24, primarily driven by cost to support the business growth, regulatory cost like PSLC and strategic investment in manpower and technology. The Total Provisions and Contingencies (including tax provisions) was Rs.4,643.39 crore as compared to Rs.4,409.92 crore in FY 2023-24.

The Profit After Tax (PAT) for FY 2024-25 stood at Rs.2,745.30 crore, an increase of 23.1 per cent. over the previous financial year. Consequently, the Return on Average Equity (ROAE) was 11.6 per cent. for FY 2024-25 against 10.7 per cent. for FY 2023-24. Return on Average Asset (ROAA) was 1.5 per cent. for FY 2024-25 against 1.4 per cent for FY 2023-24. Your Banks basic as well as diluted Earnings Per Share (EPS) increased from 3.84 for FY 2023-24 to 7.04 for FY 2024-25.

Reflecting on steady growth in the balance sheet, Total Liabilities (including capital and reserves) increased by 7.7 per cent. from ^1,77,841.66 crore as on March 31, 2024 to Rs.1,91,476.29 crore as on March 31, 2025 whereas Total Advances (Net) stood at Rs.1,31,987.32 crore, a growth of 9.0 per cent. over FY 2023-24. Total Business of your Bank increased by 10.9 percent to Rs.2,88,207 crore (Gross Advances: Rs.1,36,995 crore and Deposits: Rs.1,51,212 crore as on March 31, 2025) from previous year of Rs.2,59,923 crore (Gross Advances: Rs.1,24,721 crore and Deposits: Rs.1,35,202 crore) as on March 31, 2024.

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 Rs.72,106.54 crore (net) as on March 31, 2025, and PSL as a proportion of preceding years Adjusted Net Bank Credit (ANBC) of Rs.1,31,991 crore was 54.96 per cent.

Key Ratios

Particulars	FY 2024-25	FY 2023-24
Fee to total income	11.91%	10.32%
Cost to income	48.89%	46.84%
Earnings per share	Rs.17.04	Rs.13.84
Book value per share	Rs.145.32	Rs.126.42
Return on average assets	1.53%	1.44%
Return on average net worth	11.57%	10.65%
Operating Profit to Average Total Assets	4.13%	4.29%
Net Interest Margin	7.07%	7.35%

E. Internal Financial Control

Your Bank engages external firms to carry out independent reviews of internal controls, processes, reporting, etc., and recommendations, if any, are made by them to the Bank/ Audit Committee of the Board of Directors of the Bank(ACB) for improvement.

Considering the internal financial controls of the Bank, and the work performed by the auditors, including the audit of internal financial controls over financial reporting by the auditors and the reviews performed by management under the supervision of the ACB, the Board of Directors is of the opinion that the internal financial controls established and maintained by the Bank are adequate.

F. Business Segment Wise Performance

Segment wise business Performance of the Bank during FY 2024-25 forms part of the Boards Report.

G. Risk and Concerns

Your Bank is exposed to various risks by the very nature of its business. Your Bank has put in place a comprehensive Enterprise-wide Integrated Risk Management Framework supported by detailed policies and processes for the management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other risks. Please refer to the section Risk Management of the Boards Report for details.

H. Development in Human Resources

Details regarding developments in Human Resources including number of people employed by the Bank during FY 2024-25 forms part of the Boards Report.

I. Disclosure of Accounting Treatment

The Financial Statement has been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated and in compliance with the requirements prescribed under the Third Schedule (Form A and Form B) to the BR Act. The accounting and reporting policies of your Bank used in the preparation of the Financial Statement conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by the RBI, from time to time, the accounting standards notified under Section 133 and other relevant provisions of the Companies Act, read together with the Companies (Accounting Standards) Rules, 2021, as amended from time to time, to the extent applicable, and practices generally prevalent in the banking industry in India.

	For and on behalf of the Board of Directors
	Bandhan Bank Limited
	Anup Kumar Sinha
Place: Kolkata	Non-Executive (Independent) Chairman
Date: July 18, 2025	(DIN: 08249893)