“This article expresses my personal analysis based on publicly available financial data and market reports.”

When a bank that has long been a poster child of India’s microfinance push posts an 88% drop in quarterly earnings, you sit up and take notice. That’s exactly what Bandhan Bank Q2 Profit numbers reveal in its FY26 results — and the message is loud and clear: the landscape is shifting.

Bandhan Bank Q2 financial shock – profit plunges

In the quarter ended September 2025, Bandhan Bank reported a profit after tax of just ₹112 crore, down sharply from about ₹937 crore a year ago. The magnitude of the drop – roughly 88 % – is startling for a bank of this size and reputation.

The topline was also hit: net interest income (NII) fell about 11.8 % year-on-year, and operating profit dropped by almost 30 % from the same quarter last year. The culprit? A surge in provisions and contingencies – roughly ₹1,153 crore in Q2 compared to ₹606 crore a year earlier. 

Why did the fall happen? The role of provisions & microfinance stress

It’s clear that Bandhan’s earnings crash isn’t random – several structural pressures are in play:

• Provisions rising steeply: The bank’s provisioning needs jumped 90 % year-on-year, eating deeply into profit. 
• Microfinance exposure shrinking: Bandhan had 47 % of its loan book in microfinance (EEB) in Q2 FY25; this fell to 37 % in Q2 FY26. Their transition away from that model is costing in the near-term because microfinance was previously a higher-yield segment.
• Margin pressure & deposit mix: The net interest margin (NIM) is under pressure, and the bank’s CASA (current & savings account) ratio has dipped — meaning more expensive funding and less cushion. 
• Asset quality watching: Although gross NPAs are held at around 5%, this is higher and creeping up, hinting at underlying stress. 

In short: the bank is rebalancing – moving from risky, high-yield microfinance loans toward a more secured advance book (housing, retail, wholesale). But that transition is hurting near-term profit. The MD & CEO, Partha Pratim Sengupta, acknowledged as much, calling Q2 a “transitional phase”.

Real-world insight – why this matters for investors & customers

According to The Economic Times, From an investor’s view, this signals caution. The bank’s shares slid nearly 6 % after the announcement. When a bank with such a microfinance legacy is grappling with these issues, it’s a red flag for the sector.

For customers, especially those in the microfinance network served by Bandhan, the shift means the bank is less focused on that segment, which could translate into tougher credit conditions or slower growth in that space.

For the banking industry in 2025, this is a case study of how select banks are moving away from riskier portfolios and how that structural shift impacts immediate profitability. It’s not just Bandhan—it reflects a broader theme: secured lending, deposit cost control, and asset-quality vigilance are key in this cycle.

My take – optimism with realistic caution

Here’s my opinion: I believe Bandhan Bank is doing the right thing in repositioning itself away from microfinance dependence. Long-term, a secured advance booking is more sustainable. However, the pain in the short term is very real. This 88 % drop is not a one-quarter blip—it’s a signal of transition cost.

If I were an investor, I’d wait for signs of margin stabilisation and clarity on the non-microfinance growth path before jumping in. For a customer, I’d monitor how the bank’s shift affects product availability and rates in the micro-finance and small borrower segments.

Conclusion

Bandhan Bank Q2 profit plunge is a wake-up call: repositioning hurts in the short run. Yet if the bank rides this phase carefully, bolsters its secured book, keeps provisions tight and funding cheap, this could set the stage for stronger, more stable growth down the road. Personally, I’m cautiously hopeful: change is painful, but sometimes necessary.

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Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, not US News Weeks. We advise investors to check with certified experts before making any investment decisions.

Source : The Economic Times & Business Standard - Bandhan Bank Q2 Profit