Bandhan Bank - in a sweet spot?

WB has the highest loan outstanding per borrower. The thing in microfinance is that it is absolutely wrong to generalize any given data. Last detailed research I saw on overheating in the sector was done by dvara trust. They went into district level data and targeted districts with highest number of microfinance providers activity, highest loan book growth relative to borrower growth. There is so much granularity in India and this sector that is difficult to form any thesis with any certainty.

There are bounds to be areas, sub-districts, districts which will be over-leveraged. Even in district level data, % of borrowers over leveraged is what matters. Generally, it is business as usual as long as the borrower does not befall any tough times. The closest analogy is the NBFC sector, for a long time everything is good and suddenly when liquidity dries up or few business bets turn sour due to slowdown in economy or some calamity the loan/asset becomes distressed.

One can go through my post in Ujjivan’s thread to learn more about the sector. I have posted a few sources for secondary research. As much as I have studies the sector, my reading is it is really tough to determine with certainty when bad times in any form will befall. Best to invest in this sector with a basket approach and try to determine and stay with conservative lenders.

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