The Bandhan Bank Ltd shares have surged 7 per cent to Rs 337.95 on the BSE in intra-day trade on Monday after the Assam government on Friday inked an agreement with microfinance institutions (MFIs) to regularise stressed borrowers and repay the entire loans of highly stressed borrowers.

Moreover, as an incentive to good borrowers who did not default, the government will repay for each account Rs 25,000, or the loan amount, whichever is lower, to the MFIs. The total cost for the government will be a maximum of Rs 8,250 crore.

Brokerage firm ICICI Securities opines that this is positive for microlenders and especially Bandhan Bank as recoveries are now assured by the state.

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In the January-March quarter (Q4FY21), Bandhan Bank’s asset quality witnessed significant deterioration with Pro-forma Q4 slippages/ write-offs at 11 per cent/10 per cent (annualised), leading to >200bps decline in net interest margin (NIM).