Bandhan Bank Ltd Management Discussions.

A. Global and Indian Economy Scenario: An Overview

1. Global Economic Scenario: Aftermath of COVID-19 outbreak and fighting the resurgence

1. As a result of the worldwide impact of the coronavirus (COVID-19) outbreak and the lockdown period, the global economic growth faced severe turbulence

in FY 2020-21. All the economies across the globe took several measures on economic, social and administrative fronts to mitigate the impact of the pandemic and boost economic recovery. The International Monetary Fund (IMF) in its April 2021 report predicts that the global economy will grow by 6 per cent. during 2021. IMF has revised its projection since January 2021, where global growth during 2021 was estimated at 5.5 per cent. According to the IMF, a visible way out of the ongoing health and economic crisis exists and initiatives from the policy makers can make the outlook possible.

2. As per the IMF, reflecting on the economic recovery across the globe, the growth in the advanced economy group is projected at 5.1 per cent. in 2021. Emerging market and developing economies are projected to witness a stronger growth of 6.7 per cent. As per the IMF projections, the global economy is estimated to grow further at 4.4 per cent. in 2022; advanced economies are projected to grow at 3.6 per cent. and emerging market and developing economies are expected to grow by 5.0 per cent. in 2022. The outlook reflects additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year.

3. Among advanced economies, the United States is expected to surpass its pre-COVID GDP level before most others in the group. Similarly, among emerging market and developing economies, China has already returned to its pre-COVID GDP in 2020, whereas many others are not expected to do so until well into 2023.

4. According to the IMF, driving vaccine coverage, boosting productivity, improving policy frameworks and addressing climate change are crucial for economies. The IMF has advised all nations to work towards escaping the crisis, prioritising health care spending, providing well-targeted fiscal support and maintaining accommodative monetary policy while monitoring financial stability risks.

2. Indian Economic Scenario: Recovery from the slowdown and re-building the nation

1. As per data available from Indias Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, Indias GDP contracted by 7.3 per cent. during FY 2021 (GDP growth of -24.4 per cent. in Q1 FY2021,-7.4 per cent. in Q2 FY 2021, +0.5 per cent. in Q3 FY2021 and +1.6 per cent. in Q4 FY2021).1 Indian Economy faced the most severe turmoil in Q1 FY2021 due to the sudden outbreak of the COVID-19 pandemic, shutdown of major industries and nationwide lockdowns. However, the economy is expected to perform better in FY2022. During the meeting of the Monetary Policy Committee (MPC) in June 2021, the Reserve Bank of India (RBI) has projected a growth of 9.5 per cent. in FY2022, although a downward revision from its earlier forecast of 10.5 per cent., primarily reflecting on the second wave of the COVID-19 infections.2

2. Among the major industry groups, Trade and Transport has witnessed a decline in all the four quarters (-48.1 per cent. in Q1 FY2021,- 16.1 per cent. in Q2 FY2021,- 7.9 per cent. in Q3 FY2021 and -2.3 per cent in Q4 FY2021), whereas, Manufacturing (-36.0 per cent. in Q1 FY2021,- 1.5 per cent. in Q2 FY2021, 1.7 per cent. in Q3 FY2021 and 6.9 per cent. in Q4 FY2021), Construction (-49.5 per cent. in Q1 FY2021,-7.2 per cent. in Q2 FY2021, 6.5 per cent. in Q3 FY2021 and 14.5 per cent. in Q4 FY2021), Financial Services & Real Estate (-5.0 per cent. in Q1 FY2021, -9.1 per cent. in Q2 FY2021, 6.7 per cent. in Q3 FY2021 and 5.4 per cent. in Q4 FY2021) and Utility Services (-9.9 per cent. in Q1 FY2021, 2.3 per cent.

In Q2 FY2021, 7.3 per cent. in Q3 FY2021 and 9.1 per cent. in Q4 FY2021) have made recovery during the latter half of FY2021. However, Agriculture (3.5 per cent. in Q1 FY2021, 3.0 per cent. in Q2 FY2021, 4.5 per cent. in Q3 FY2021 and 3.1 per cent. in Q4 FY2021) recorded a positive growth in all the four quarters.3

3. Indias Consumer Price Index (CPI) inflation stood at 5.52 per cent. in March 2021, with high inflation across several sub-groups such as food, core, fuel and transportation.4 The Wholesale Price Index (WPI) inflation stood at 7.39 per cent. in March 2021.5

Subsequently, inflation prints moved further higher - as per the data pertaining to May 2021, CPI and WPI inflation stood at 6.3 per cent. and 12.9 per cent., respectively.

4. The Government of Indias gross fiscal deficit in FY2021 was 9.3 per cent. of the GDP against a projection of 9.5 per cent. by the Ministry of Finance during the February 2021 Union Budget.6 As per the Union Budget announced in February 2021, the Government of India has fixed a fiscal deficit target of 6.8 per cent. of the GDP in the FY2022.

5. The sharp impact of the COVID-19 pandemic on the the economy has prompted the Government of India and RBI to implement several policy initiatives to combat the economic turbulence due to the nationwide lockdown and restrictions of business, trade and services.

6. The Government of India announced a fiscal stimulus package of nearly Rs. 21 lakh crore to cushion the economy from the severity of the impact of the COVID -19 pandemic. The stimulus was intended to spread across various sectors in the economy and also aimed at improving conditions of the underprivileged and the poor.

7. RBI has kept the repo rate unchanged at a markedly low level of 4 per cent. and reverse repo rate at 3.35 per cent. since May 2020 to mitigate the impact of the COVID-19 pandemic and support economic recovery. RBI also announced several measures to infuse a large quantum of liquidity since the outbreak of the COVID -19 pandemic.7

8. In March 2020, RBI announced auctions of Targeted Long Term Repo Operations (TLTRO) of up to three- year tenor of appropriate sizes for a total amount up to Rs. 1 lakh crore at a floating rate with the objective of ensuring adequate liquidity in the financial system. Later, in April 2020, RBI announced TLTRO-2 of another Rs. 50,000 crore. Subsequently, RBI introduced on-tap TLTRO and eventually extended the period up to September 2021.8

B. Indian Banking: Key industry developments

1. Non-food credit (NFC) from scheduled commercial banks grew at around 4.9 per cent. year-on-year in March 2021 compared to 6.7 per cent. in March 2020.9 According to RBI, credit growth for the agriculture and allied segment witnessed a significant rise at 12.3 per cent. in March 2021, as compared to 4.2 per cent. in March 2020. Credit to industry continued to be subdued and witnessed a growth of 0.4 per cent. in March 2021, as compared to 0.7 per cent. in March 2020.

2. The microfinance industry has witnessed a moderate growth. As per the latest CRIF MicroLend report (Volume XV, March 2021), the microfinance industry has witnessed a year-on-year growth of 8.4 per cent. as at the end of March 2021. Banks (excluding Small Finance Banks) have witnessed year-on-year growth of 15.5 per cent. Small Finance Banks have witnessed a year-on-year decline of 6.6 per cent. and NBFC-MFIs witnessed a year-on-year growth of 10.1 per cent.

3. RBI has announced a fresh Special Liquidity Facility (SLF) of Rs. 50,000 crore to All India Financial Institutions for new lending in April 2021 to support the continued flow of credit to the economy in the aftermath of the COVID-19 pandemic.10 RBI further announced an additional SLF of Rs. 16,000 crore to Small Industries Development Bank of India (SIDBI) at the Monetary Policy Meeting of June 2021.11

4. As per the January 2021 Financial Stability Report of RBI, the Gross Non-Performing Assets (GNPA) of the Indian banking industry was 7.5 per cent. in September 2020, a decrease from 8.5 per cent. in March 2020.12 However, macro-stress tests for credit risk reveal that under RBIs baseline scenario, GNPA ratio of the Indian banking system is likely to increase to 13.5 per cent. in September 2021.

1. Opportunities

• Enabled by a strong bureau infrastructure with over 60 per cent. adult population coverage, the retail lending portfolio is likely to expand further once the growth momentum recovers.13

• Commercial banking is expected to be a major engine of credit growth as penetration of formal credit improves with ongoing financial deepening, especially with GST and digitisation of transactions.

• Fresh liquidity support from RBI to financial institutions will likely support the economy through disbursal of funds mitigating the impact of the COVID-19 pandemic.

• Digital financial transactions are likely to grow, exponentially driven by, inter alia, government decisions allowing non-banks for NEFT-RTGS services and further operating enhancements to Prepaid Payment Instruments.

• Consent-based data sharing is expected to change Indian banking as banks will no longer have a monopoly over customer data.

• Banks can provide more support to different sectors such as Agriculture, Housing and MSME through priority sector lending (PSL) classification lending extension.

2. Threats

• The resurgence of the COVID-19 pandemic has affected the economy once more. As India is coming out of one of the most difficult scenarios in terms of new cases, the economy braces itself to witness disruption in recovery in growth in the coming months.

• Subdued demand and NPA issues are likely to hold back the growth in bank credit during FY2022.

• Emerging cybersecurity related challenges in the financial services industry and constant enhancements to capabilities of Prepaid Payment Instruments, digital banks and nonbanks are matters of concern.

• Fintech companies with new business models backed by robust technology are likely to increase the competition for the banks.

3. Outlook

1. According to RBIs latest forecast, Indias real GDP will likely grow at 9.5 per cent. during FY2022. Rating agency Moodys expects growth to be at 9.3 per cent., while Organisation for Economic Co-operation and Development (OECD) expects a growth of 9.9 per cent. during FY2022.

2. Constant vigilance in the fight with the resurgence of the COVID-19 pandemic, implementation of effective financial tools, proper focus on healthcare and vaccination coverage, widespread implementation and enhancement of digital avenues and boosting of economic productivity through all significant industry segments are the most important objectives to recover from the prevailing crisis and build upon a stable financial system.

C. Strategy

Your Bank has clearly laid out its aspirations to be an affordable financial institution by providing simple, cost- effective and innovative financial solutions in a courteous and responsible manner. It intends to create value for all stakeholders through a committed team, robust policies and superior systems and technology.

The Banks 2025 vision is powered by the following objectives -

1. Banker for the new Indian, through every step of their aspiration journey

2. Serving needs of emerging India

3. Enabling entrepreneurs to grow bigger

4. Value-based employer of choice - to attract high quality, motivated talent

In order to drive this vision of the Bank, the following would be the key focus areas in the coming years -

• Diversification of asset portfolio with modern underwriting and collection capabilities

• Strengthening people capabilities, including hiring of fresh talent, for growth

• Development of in-house technology, analytics and digital capabilities

• Consolidate Current and Savings Account (CASA) by developing deeper customer engagement leveraging digital and analytics

Given the huge untapped opportunity in the microcredit space in India, your Bank in the medium term will continue to expand its current geographic reach and increase its presence in the underbanked areas across the country.

Your Bank will leverage its microcredit experience and upgrade its top-bracket micro banking customers to provide them individual loans. Your Bank will also utilise the skills and expertise of erstwhile GRUH Finance to penetrate strongly into the affordable housing segment. The Small and Medium Enterprises (SME) segment is expected to contribute strongly to the growth story with rising demand from the diverse business entities in the country.

As part of its strategy, your Bank has been a part of various social development programmes on enhancing education, health, poverty alleviation, livelihood promotion, market linkages, enterprise development, employment generation and financial literacy. Going forward, your Bank will continue to engage with the community through strategic interventions aimed at contributing to society.

Since its inception, your Bank has transformed with each milestone, to become better and stronger. As a universal bank and in all its previous avatars, each transformation resulted in further broad-basing of services, growth and increased impact on people and communities. As the Bank is about to commence its seventh year of operations, your Bank continues to evolve focusing on serving the needs of emerging India and to be the banker for the new Indian, through every step of their aspiration journey.

Your Bank is committed to executing its strategy ensuring professional integrity, corporate governance and ethical standards, and all legal and regulatory compliance.

D. Financial Performance of the Bank

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

Summary of Financial Performance

(Figures in Rs. crore)

Particulars For the financial year ended
March 31, 2021 March 31, 2020
Deposits: 77,972.22 57,081.50
Advances (Net): 81,612.88 66,629.95
Total Assets/Liabilities 1,14,993.05 91,717.80
Net Interest Income 7,563.35 6,323.91
Non-Interest Income: 2,109.06 1,549.20
Operating Expenses (excluding depreciation) 2,714.09 2,346.28
Profit before Depreciation, Provisions and Tax 6,958.32 5,526.83
Depreciation 103.06 80.26
Provisions 3,906.60 1,393.15
Profit before Tax 2,948.66 4,053.42
Provision for Tax 743.20 1,029.68
Profit After Tax 2,205.46 3,023.74
Balance in Profit & Loss Account brought forward from previous year 4,758.71 3,283.64
Opening Profit & Loss Account balance adjustment on account of amalgamation - (64.55)
Transfer to Statutory Reserves 551.37 755.94
Transfer to Statutory Reserve u/s 36(1)(viii) of Income Tax Act 1961 74.37 103.12
Transfer to Capital Reserve 84.64 11.45
Transfer to Investment Reserve - 5.16
Transfer to Investment Fluctuation Reserve 82.79 -
Dividend Paid (Including Dividend Distribution Tax) - 608.45
Balance carried over to Balance Sheet 6,171.00 4,758.71
EPS (Basic) 13.70 18.78
EPS (Diluted) 13.69 18.76

The financial performance of your Bank during the financial year ended March 31, 2021, remained healthy with the Total Net Revenue (Net Interest Income Plus Other Income) rising by 22.85 per cent. to Rs. 9,672.41 crore from Rs. 7,873.11 crore in the previous financial year. Net Interest Income grew by 19.60 per cent. to Rs. 7,563.35 crore due to a robust growth in advances and a decrease in the cost of funds. The net interest margin (NIM) was 7.78 per cent. during FY 2020-21 as against 8.12 per cent. during the FY2019-20.

Other Income grew by 36.14 per cent. to Rs. 2,109.06 crore. The largest component was Income from sale of Priority Sector Lending Certificate (PSLC), which increased by 61.42 per cent. to Rs. 731.76 crore. Income from treasury-related activities (such as sale of investments, unrealised profit / loss on account of revaluation of investments in the fixed income portfolio, equity and preference shares portfolio) increased to Rs. 309.18 crore during FY 2020-21 from Rs. 114.05 crore during FY 2019-20 primarily due to profit from the sale of investments.

Operating (Non-Interest) Expenses increased to Rs. 2,817.15 crore from Rs. 2,426.54 crore during FY 2019-20.

Infrastructure and staffing expenses contributed to 20.61 per cent. of this increase. During the FY under review, your Bank has set up 129 new branches, 622 new Banking Units and 2 ATMs. Employee strength increased to 49,445 during FY 2020-21 from 39,750 as on March 31, 2020.

Staff expenses also went up due to annual wage revisions and there was a 24.39 per cent. increase in staff strength. Despite an increase in infrastructure and staff expenses, the Cost to Income Ratio slightly improved to 29.13 per cent. from 30.82 per cent. in FY 2019-20.

The profit after tax (PAT) at the end of the FY stood at Rs. 2,205.46 crore, a decrease of 27.06 per cent. over the previous financial year due to higher provisioning. Consequently, the Return on Average net worth was 13.24 per cent. in FY 2020-21 against 21.07 per cent. in FY 201920. Return on Average Asset (ROAA) was 2.13 per cent. in FY 2020-21 against 3.64 per cent. in FY 2019-20. The Banks basic earnings per share (EPS) decreased from Rs. 18.78 in FY 2019-20 to Rs. 13.70 in FY 2020-21 and diluted EPS decreased from Rs. 18.76 in FY 2019-20 to Rs. 13.69 in FY 2020-21.

Total Provisions and Contingencies was Rs. 4,649.80 crore as compared to Rs. 2,422.83 crore in FY 2019-20. Your Bank made Specific Provisions of Rs. 4,331.70 crore during the financial year under review and a reversal of General Provision of Rs. 583.44 crore.

However, reflecting on the steady growth in the balance sheet, Total Liabilities (including capital and reserves) increased by 25.38 per cent. from Rs. 91,717.80 crore as on March 31, 2020 to Rs. 1,14,993.05 crore as on March 31, 2021 whereas Total Advances (Net) stood at Rs. 81,612.88 crore, a growth of 22.49 per cent. over FY 2019-20.


Priority Sector Lending and Investment

RBI has mandated Priority Sector Lending (PSL) of 40 per cent. of advances for all the banks. Your Banks strength lies in priority sector lending as it continues to focus on financial inclusion by providing various financial services to the underserved. During FY 2020-21, your Banks PSL went up from Rs. 60,640.98 crore (net of IBPC of Rs. 4,612.70 crore) on March 31, 2020 to Rs. 74,369.51 crore (net of IBPC of Rs. 2,124.13 crore) on March 31, 2021 of which Rs. 70,448 crore was sold to other banks falling short of PSL targets by way of PSLC (as against the previous year of Rs. 56,805.75 crore).

At the end of FY 2020-21, PSL as a proportion of the gross advances of Rs. 84,509.60 crore (after IBPC) was 88.00 per cent. (including PSLC).


Key Ratios

The following table sets forth the key financial ratios for the periods indicated hereinbelow:

Particulars FY 2020-21 FY 2019-20
Fee to total income 14.41% 12.46%
Cost to income 29.13% 30.82%
Earnings per share# Rs. 13.70 Rs. 18.78
Book Value per share Rs. 106.47 Rs. 94.37
Return on average assets# 2.13% 3.64%
Return on average net-worth# 13.24% 21.07%
Operating Profit to Average Total Assets 6.63% 6.56%
Net Interest Margin 7.78% 8.12%

#The Bank has made additional provisions against the existing NPA accounts resulting from elevated risk observed in certain geographies and potential impact of COVID-19 pandemic on certain loan portfolios.

E. Business Segment-wise Performance

A. Emerging Entrepreneurs Business (EEB)

Your Bank has been serving borrowers at the bottom of the pyramid with affordable and convenient loans to help them develop into entrepreneurs and transform their lives. Your Bank realised that these customers need enhanced banking facilities to help them achieve their dreams and aspirations. Therefore, in order to provide them with wholesome banking support, your Bank established a new vertical called EEB serving Micro Banking customers both micro credit loans under the JLG model and Individual Business Loan, Micro Home Loans, Micro Bazaar Loans and Two Wheeler Loans.

Your Banks EEB strategy is guided by its long-held philosophy of financial inclusion and economic empowerment of the disadvantaged sections of the society.

During FY 2020-21, your Bank opened 618 new Banking Units and offered EEB loans to 16,26,127 new borrowers. The growth of 26.32 per cent. in the aggregated EEB asset portf^olio from Rs. 46,189 crore to Rs. 58,346 crore during FY 2020-21, is another indicator of its commitment.

In order to meet the financial requirements of our customers, the following key products are offered by your Bank under EEB:-


Microcredit Loans

1. Suchana Loan: Loan size is from Rs. 1,000 to Rs. 25,000 (no processing fee) and is sanctioned for income generating activities.

2. Srishti Loan: Loan size is from Rs. 25,001 to Rs. 1,50,000.

3. Su Briddhi Loan: Sanctioned to help customers fulfil their extra business requirement during their ongoing loan.

4. Samadhaan Loan: The COVID-19 pandemic and nationwide lockdowns affected the routine life of everyone in the country. It had an impact on the EEB customers of your Bank as normal business activities remained affected in the country. Your Bank introduced the Samadhaan Loan product from Rs. 5,000 to Rs. 15,000 to support these existing EEB borrowers.

5. Suraksha Loan: Loan size is up to Rs. 10,000 and is sanctioned to help customers meet emergency expenses due to health issues.

6. Susiksha Loan: Loan size is up to Rs. 10,000 and is sanctioned to help customers meet expenses towards the education of their children.


Individual Loans

1. Samriddhi Business Loans: With a loan size from Rs. 75,000 to Rs. 3,00,000, this product has been designed specifically to meet the financial requirements of the entrepreneurs who, after starting small, have shown considerable success in their endeavour and now aspire to be graduated to a higher level of entrepreneurship.

2. Micro Bazar Loan: With a loan size from Rs. 25,001 to Rs. 1,50,000, this product is for small entrepreneurs, who have an existing super-saver account with your Bank. This loan provides financial support to deposit customers for their working capital needs.

3. Micro Home loan: Your Bank offers Micro Home Loan ranging from Rs. 1,00,000 to Rs. 10,00,000 to existing EEB borrowers for construction as well as renovation of their houses so that this dream of theirs doesnt remain unfulfilled.

4. Two-wheeler loan: Your bank offers two-wheeler loans ranging from Rs. 30,000 to Rs. 80,000 to existing EEB borrowers; it brings them a step closer to their aspirations.

B. Commercial Banking Small Enterprise Loan (SEL)

SEL is a unique business loan product for small entrepreneurs. These are affordable loan products for meeting the credit needs of entities having income generating activities in the form of working capital or assets creation for business or short-term business requirement.

Your Bank has taken various initiatives over the last year to tap into this segment. These include enhancement of maximum limit of the loan amount from Rs. 10 lakh to Rs. 25 lakh and smoothening the file processing by delegation of the sanctioning power to regions, among others. Further, your Bank has also initiated the deployment of a Loan Origination System to improve the processing time of loan files.

SEL has accounted for a total Book size of Rs. 3,095 crore as on March 31, 2021, registering a growth of 50 per cent. during FY2020-21. The loan outstanding was Rs. 2,066 crore as on March 31, 2020.


Small & Medium Enterprises Loan (SME)

The SME business under Commercial Banking focuses on secured loans with a ticket size of more than Rs. 10 lakh, which are extended to business entities (including SMEs & Mid-sized corporates) involved in manufacturing, trading and services through products designed to cater to their specific business needs.

The range of major products offered includes fund-based facilities such as cash-credit, term loans, overdrafts, demand loan and non-fund based facilities such as bank guarantees and inland letter of credit. Your Bank is in the process of implementing Cash Management and Trade Services to expand the service offering to its Commercial clients.

The SME book was at Rs. 1,504 crore as on March 31, 2021, registering a growth of about 102 per cent. during FY 2020-21. The loan outstanding was Rs. 745 crore as on March 31, 2020.


Non-Banking Financial Company (NBFC) and NBFC- Microfinance Institutions (MFIs)

The NBFC-MFI Lending business vertical lends to Micro Finance Institutions, Societies and Trusts engaged in microfinance activities. While most of these loans are extended as Term Loans, the Bank also has credit exposure through Direct Assignments. Leveraging its rich experience in micro banking, the Bank has developed an internal credit rating model to assess the credit risk while lending to this segment.

The NBFC lending vertical lends to all NBFCs, other than MFIs/Society/Trust engaged in micro finance activities. This vertical primarily deals with Term Loan products for on- lending purposes.

The Institutional book, comprising of lending to NBFCs and NBFC-MFIs depleted by 24 per cent., from Rs. 3,537 crore as on March 31, 2020 to Rs. 2,691 crore (including TLTRO of Rs. 409 crore) as on March 31, 2021, since the Bank was cautious in building incremental advances in this segment.

C. Retail Assets

Retail Assets portfolio currently comprises Home Loan, Loan Against property (LAP), Gold Loan, Personal Loan (PL), Two-Wheeler (TW) Loan and Loan/Overdraft against Term Deposits. The Retail Assets book stood at Rs. 21,406 crore as on March 31, 2021.

Post-merger of GRUH Finance Limited, your Bank has expanded its scope of housing activities and has started offering home loan products from more than 125 additional bank branches as well. Your Bank continues to focus on the affordable housing space and has tied up with various Government projects as well as projects in the private sector in the affordable housing space. Consequently, a majority of the housing loans are also eligible under the PSL category. As on March 31, 2021, your Bank is having a total Housing plus LAP exposure of Rs. 20,213 crores constituting 23 per cent. of the gross advances.

During the financial year under review, the Gold Loan portfolio was strengthened and is being offered from 321 branches across the country. Book size grew from Rs. 222 crore to Rs. 394 crore, with 34,119 borrowers.

The financial year under review, also saw the reintroduction of PL with a new credit framework and PL attained a book size of Rs. 91 crore by registering a 24 per cent. growth over the previous year.

D. Liabilities

In building its liability business, the strategic focus of your Bank has been on retail customers. During the financial year under review, your Bank set up 129 new branches and 2 new ATMs. As a result, the branch distribution network went up to 1,147 branches and 487 ATMs during FY 2020-21.

The branch network covers different kinds of locations to maintain an appropriate balance among rural (banked and unbanked), semi-urban, urban and metropolitan regions.

Your Banks customer deposits grew by 37 per cent. during FY 2020-21. Retail deposits at 79 per cent. of the total deposits indicate that your Bank has been able to reduce its funding through bulk term deposits. Your Banks focus on the generation of low-cost deposits has resulted in the growth of its CASA book to 43.4 per cent. at the end of the FY 2020-21.

(In Rs. crore)

Type of deposit / financial Year As at March 31
2021 2020
Total 77,972 57,082
Of which:
Current account 4,567 3,301
Savings account 29,260 17,727
Term deposits 44,145 36,054
Of which
Retail term deposit 27,606 23,742
Bulk term deposit^ 16,539 12,312

^ Term deposit of crore and above


Third-party Products

Despite the challenges in the operating environment triggered by the pandemic, your Bank, through its internal processes and products proposition, ensured the distribution of Third-party Products as per the financial needs of the customer. In the Banks endeavour to be a one-stop-shop experience for all banking services to its customers, Third-party Products play an important role.

Your Bank currently distributes Mutual Funds, Life Insurance, General Insurance including Health Insurance, and Co-Branded Credit Cards. Mutual funds are distributed only through select metro, urban and semi-urban branches. Credit cards as well are available through select branches.

The total Mutual Fund AUM managed under the Banks code during FY 2020-21 was Rs. 324.23 crore, earning an income of Rs. 2.32 crore. For Non-Life and retail Life Insurance, a total of Rs. 120.74 crore and Rs. 327.60 crore of business was garnered through the branches during FY 2020-21, earning a fee income of Rs. 14.20 crore and Rs. 93.05 crore, respectively. During FY 2020-21, the Life Insurance business, through the existing arrangement in EEB and other asset verticals, amounted to Rs. 855.63 crore earning an income of Rs. 42.80 crore.

Your Bank has distributed Co-Branded Credit Cards and earned Rs. 1.03 crore as commission during FY 2020-21.

Your Bank has earned Rs. 0.04 crore as commission for distribution of Atal Pension Yojana and NPS Lite Swavalamban schemes of PFRDA during FY 2020-21.


Merchant Acquiring Business

During FY 2020-21, your Bank installed 3,451 EDC- PoS terminals, and transactions worth Rs. 5,264.97 crore were carried out on your Banks installed terminals.


Digital Banking

Digitalisation and innovation are two key strategic focus areas for your Bank to drive customer centricity, build productivity and efficiency, and attain scalability. Your Banks ability to cater to the 360-degree banking needs of its customers in an omni channel manner through both hi-touch and hi-tech mode using its robust and secure digital channels is one of the key imperatives to its growth. Your Bank continues to invest in upgrading the technology stack along with leveraging emerging technologies and data analytics to enhance customer experience, deliver better customer value and improve operational efficiency.

COVID-19 pandemic has led to accelerated digital adoption and your Bank has been driving the Digital and IT transformation internally with great agility. During the financial year under review, your Bank focused on a set of new initiatives to build a simple, smart, secure and seamless platform to bring convenience at few clicks. Some notable initiatives include the launch of Neo+ digital account opening, Digital Banking feature enhancements, improving payments experience, the launch of the new contemporary website, the launch of Bandhan Bank BHIM UPI 2.0 app and many other changes for our customers. Moreover, your Bank has been working towards on-boarding the best of the breed of applications as part of the IT transformation and building the new architecture for agility, flexibility and scalability. Your Bank has also taken steps in actively engaging with start-ups and fintech communities to work on building new-age digital capabilities.

During FY 2020-21, your Bank has grown more than the industry growth rates across digital banking metrics. The number of customers adopting digital banking platforms of your Bank more than doubled growing by 113 per cent. over FY 2019-20 customer base.

F. Internal control systems and their adequacy

Your Bank has implemented robust internal controls across all processes and departments. These controls are driven through various well-defined policies and procedures, which are reviewed periodically. Your Bank has a procedure of testing the controls at regular intervals for their design and operational effectiveness to ascertain the reliability and authenticity of financial information.

Your Bank has an Internal Audit Department (lAD) and a Compliance department, which independently carry out the evaluation of the adequacy of all internal controls. These departments ensure that operations and business units adhere to laid down internal processes and procedures as well as to regulatory and legal requirements. The lAD also proactively recommends improvements in operational processes and service quality. Your Bank has put in place extensive internal controls including audit trails, appropriate segregation of front and back-office operations, posttransaction monitoring processes at the backend to mitigate operational risks. It further ensures independent checks and balances, and adherence to the laid down policies and procedures of the Bank are according to the regulatory guidelines. Your Bank has adhered to the highest standards of compliance and governance and has placed controls and appropriate structure to ensure this. To safeguard the independence, the performance evaluation of the Chief Compliance Officer (CCO) and the Chief Audit Executive (CAE) is carried out by the Audit Committee of the Board. It further reviews the effectiveness of controls and compliance with regulatory guidelines. The Board of Directors confirms that there are internal controls in place with reference to the Financial Statements and that such controls are operating effectively. Further details are provided under the Internal Financial Controls, Audit and Compliance section of the Boards Report.

G. Risks 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 management of Credit Risk, Market risk, Liquidity Risk, Operational Risk and various other risks. Please refer to the section Risk Management of this Boards Report for details.

H. Material developments in Human Resources

Your Bank understands the power of human motivation and dedicated efforts to achieve the desired goal. As a bank, we are proud of our employees who have served throughout the year during this pandemic as an exemplar of customer service. Our focus includes, rewarding and recognizing the performance, ensuring a safe and competitive work environment for the employees and providing a platform for sustainable growth. The Human Resource Department also drives the initiatives for the an employees wellbeing, by way of subsidised loans and also, more importantly for their physical wellbeing.

During FY 2020-21, your Bank increased its employee strength to 49,445 from 39,750. Your Bank has also added 129 Retail Banking Branches, 618 Banking Units and 4 Home Loan Centres. Series of programmes were conducted to meet the on-going learning and development needs in the Bank and promote an environment of learning, self-growth and excellence. The learning architecture in your Bank focusses on:

• Developing tailor-made, competency based programmes for different sets of employees, based on their roles and functional area in the Bank

• Induction and on-boarding programmes for the new hires through online and offline mode

• Training the front line bankers on several aspects of Compliance, AML, Risk and Regulatory norms

• Specifically designed tailor made programmes delivered by specialists for Leadership roles covering areas such as conflict management, people management, etc.

• Competency-based succession plan for majority of the roles; overall 7,000 employees were identified for the higher role

• Competency-based promotion process to nurture identified talent

• Identification of critical resources and differentiated career path for retaining the critical resources

• Creating a fresh talent pool by adding resources from college campuses and the NextGen Bankers Programme

• Introduction of the COVID-19 homecare programme for staffs, with approximately 600 impacted staffs utilised the professional service

• Digitisation of the various HR processes to enhance employee experience

Your Bank has completed the annual appraisal process during the financial year under review for all the eligible employee and amid all the crisis employees were paid their annual increments and performance-based variable pay/ bonuses. Overall approximately over 31,000 employees participated in the process. Your Bank has also taken various precautionary measures during the pandemic crisis and successfully executed the banking operations by optimising workforce deployment.

The Bank provides a wide range of training programmes to employees across departments and functions, to build their professional competence and improve their skill sets, and thus, enable them to contribute to your Banks mission.

I. Disclosure of Accounting Treatment

The financial statements have been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated and comply with the requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of your Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by RBI from time to time, the accounting standards notified under section 133 and the relevant provisions of the Companies Act 2013, read together with the Companies (Accounts) Rules 2014 and the Companies (Accounting Standards) Amendment Rules, 2016, 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: June 25, 2021 (DIN: 08249893)