Why Is Bandhan Bank Share Price Falling? Key Reasons & Share Price Target

Bandhan Bank (NSE: BANDHANBNK) has been one of India’s most painful banking sector stories over the past five years. The stock, which once traded above ₹700 in 2019, is now at approximately ₹149 — a fall of nearly 80% from peak levels. In 2026 alone, Bandhan Bank shares have declined 12%, underperforming the Sensex’s marginal movements. Why are Bandhan Bank shares falling, and is there finally a recovery on the horizon after this prolonged correction?

The reasons are a combination of structural issues — excessive MFI (microfinance institution) exposure, persistent NPA cycles, margin compression, and promoter stake overhang. However, Q3 FY26 showed signs of stabilisation, leading some brokerages like Motilal Oswal and Emkay to upgrade the stock. This article examines both sides of the argument.

About Bandhan Bank

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Bandhan Bank Limited, headquartered in Kolkata, was incorporated in 2015 after receiving a universal banking licence from the Reserve Bank of India. It is a private sector bank focused on serving unbanked and underbanked populations, offering microfinance, MSME, and affordable housing finance alongside regular banking services. Bandhan Bank operates in 34 out of 36 states and union territories, with 5,646 banking outlets and 27.8 million customers as of 2025.

The bank’s original focus was microfinance — specifically lending to small women entrepreneurs in rural and semi-urban India. While this gave it rapid growth early on, the MFI portfolio’s vulnerability to economic shocks has repeatedly triggered NPA cycles, making the Bandhan Bank share price a barometer of rural India’s financial stress.

Why Is Bandhan Bank Share Price Falling? Key Reasons

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1. Prolonged NPA Cycle in MFI Portfolio

The primary reason Bandhan Bank shares are falling is its long-running NPA (Non-Performing Asset) cycle, concentrated in its Emerging Entrepreneurs Business (EEB) or MFI portfolio. The bank has been through multiple waves of microfinance defaults — post-COVID, post-flood events in Assam, and now a fresh wave triggered by RBI’s tighter microfinance regulations.

In Q2 FY26, Bandhan Bank’s net profit plunged 88% YoY to ₹112 crore from ₹937 crore in the year-ago period. While gross NPA was stated at 5.0% and net NPA at 1.4%, the provision coverage ratio of 73.7% and credit cost of 3.4% reflect how much capital the bank is having to set aside against bad loans.

2. Weak Q2 FY26 Results Trigger Selloff

Bandhan Bank’s Q2 FY26 results (October 2025) were the catalyst for a fresh wave of selling. NII fell 11.8% YoY to ₹2,589 crore, operating profit dropped nearly 30%, and net profit fell 88% to ₹112 crore. Revenue declined 11.5% YoY. The scale of profit collapse — nearly nine-tenths wiped out in a single quarter — was severe enough to trigger an 8% single-session fall in the stock.

3. Margin Compression from Business Mix Change

Bandhan Bank is deliberately transitioning away from its MFI-heavy model toward secured lending, including home loans and MSME credit. This is the right long-term strategy, but it comes with near-term margin pain. The NIM compressed by 50 basis points QoQ in Q2 FY26 — significantly above expectations. As the loan book shifts toward lower-yielding secured loans, margins will remain under pressure for several quarters.

4. Promoter Stake Sale Overhang

In March 2026, Bandhan Bank shares crashed nearly 10%, hitting a lower circuit, after reports that promoter Bandhan Financial Services is exploring exit options for long-term investors including GIC Ventures and International Finance Corp (IFC). The promoter is required to reduce its stake to 26% by 2030 (from the current ~40%), and the potential block deal at a discount raised fears of near-term supply pressure on the stock.

5. Weak Promoter Obligation to Divest

A RBI-mandated promoter holding reduction deadline adds a structural overhang. Bandhan Financial Services will need to sell significant stakes over the next few years, creating periodic supply pressure. Whether through a block deal, an IPO of the holding company, or a phased institutional placement, the dilution risk keeps long-term investors cautious about accumulating large positions.

6. Five Years of De-Rating

Bandhan Bank has de-rated significantly over five years — its P/BV ratio has fallen from 6-7x to below 1x. Return on equity, which was above 25% in its early years, has collapsed to approximately 4.1% in recent quarters. Return on assets (ROA) is just 0.52%, well below the 1.5%+ that quality private banks typically achieve. This structural weakness in return ratios explains why the stock has been in a persistent downtrend.

Bandhan Bank Latest News That Impacted the Stock

• October 31, 2025: Q2 FY26 results — net profit fell 88% YoY. Stock falls ~5% on the day.
• November 2025: MFI sector defaults accelerate as RBI tightens microfinance rules; NBFC-MFI sector under pressure.
• November 28, 2025: Bandhan Bank announces plan to sell bad loan portfolios worth ₹6,900+ crore to asset reconstruction companies — balance sheet clean-up move.
• January 22, 2026: Q3 FY26 results — net profit ₹210 crore (up 84% QoQ); GNPA down to 3.33% (vs. 5.0% in Q2). Multiple brokerage upgrades.
• January 23, 2026: Motilal Oswal upgrades to ‘Buy’ with target ₹175. JM Financial upgrades. Stock rises 5.5%.
• March 2026: Reports emerge about Bandhan Financial Services exploring stake sale to exit long-term investors. Stock hits lower circuit, crashes 10%.
• March 27, 2026: Stock closes at ₹148.70, down 6.15% for the week; Mojo Score at 38 (Sell).

Financial Performance Analysis

Q3 FY26 shows genuine improvement: GNPA fell from 5.0% to 3.33% (partly aided by NPA sale to ARCs), NII grew 4% QoQ, and NIM improved 6 bps. This is what triggered the January 2026 brokerage upgrades. However, the March promoter stake overhang wiped out those gains. Track Bandhan Bank live on the

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Technical Signals: What the Charts Are Saying

Bandhan Bank is trading at ₹149, below all key moving averages and close to multi-year lows. The stock hit a 52-week low of ₹128.10 in December 2025; the 52-week high was ₹192.45. P/BV has fallen below 1x — a level that historically attracts value investors in quality banking names. Support at ₹143-148; resistance at ₹162-170.

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Market Sentiment & Institutional Positioning

The sentiment is divided. Motilal Oswal and Emkay have upgraded on valuation grounds (0.7x FY28 book value appears cheap for a banking franchise with 27.8 million customers). Nuvama maintains ‘Reduce’ with ₹133 target; Nirmal Bang is cautious on EEB portfolio overhang. The promoter stake sale news shifted the balance sharply toward the bearish camp in March 2026.

West Bengal contributes 42% of the EEB portfolio — a geographic concentration that creates vulnerability to state-level economic shocks or political events.

Future Outlook: Can Bandhan Bank Recover?

There are genuine positives. GNPA improved sharply from 5.0% to 3.33% in Q3. NIM stabilised for the first time after two quarters of compression. The ARC sale reduced the NPA burden. Motilal Oswal expects ROA to recover to 1.3-1.5% by FY27-28, versus an estimated 0.6% in FY26 — a significant earnings recovery if achieved.

The bank is actively diversifying into secured loans (home loans, MSME), which should reduce future vulnerability to MFI cycles. Digital banking adoption is growing, with a large share of transactions now online.

The counterargument: this is the third or fourth time in five years that Bandhan Bank has appeared to stabilise, only for a new wave of MFI stress to emerge. The structural ‘West Bengal dependency’ and microfinance vulnerability are deep-rooted issues that take years to resolve. Until ROE sustainably crosses 12-15%, the stock will struggle to re-rate.

Bandhan Bank Share Price Target

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Short-Term Target (3-6 Months)

Conservative: ₹143-155 range, constrained by promoter stake overhang and sector caution. Bull case: ₹165-175 if Q4 FY26 confirms continued GNPA improvement and no further promoter stake news.

12-Month Analyst Target

Motilal Oswal: ₹175 (Buy). JM Financial: ₹160 (Add). Nirmal Bang: ₹153. Nuvama: ₹133 (Reduce). Consensus sits around ₹155-165, implying modest upside from current ₹149. CLSA has an Outperform rating with ₹143 target.

Long-Term Target (2027-2028)

If ROA recovers to 1.3-1.5% by FY28 as Motilal Oswal projects, and the secured loan book reaches 50%+ of total advances, the stock could potentially trade at 1.5-2x FY28 book value — implying a price range of ₹200-240. This is a patient investor’s thesis requiring 2+ years. Explore the live target on the

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Conclusion

Bandhan Bank shares are falling because of a five-year de-rating driven by serial NPA cycles in its MFI portfolio, margin compression from business mix changes, and most recently, a promoter stake sale overhang. While Q3 FY26 showed genuine improvement in asset quality, the March 2026 stake sale news reset confidence. The 12-month analyst consensus target of ₹155-175 implies modest upside, but investors need patience and tolerance for near-term volatility.

This article is for informational purposes only. Please conduct your own research and consult a SEBI-registered financial advisor before making any investment decisions.

FAQs

Why is Bandhan Bank share price falling?

Bandhan Bank shares are falling due to a prolonged NPA cycle in its microfinance portfolio, Q2 FY26 net profit plunging 88% YoY, margin compression from shifting to secured lending, and promoter stake sale concerns. The stock has de-rated significantly over five years, with ROE falling from 25%+ to approximately 4%.

What is the Bandhan Bank share price target?

Analyst targets range from ₹133 (Nuvama, Reduce) to ₹175 (Motilal Oswal, Buy). Consensus sits around ₹155-165. At the current price of ~₹149, most upgrades suggest 5-17% upside. A sustained improvement in GNPA below 3% and NIM recovery would be needed for the stock to re-rate toward ₹175+.

Is Bandhan Bank stock a buy or sell?

Mixed signals — Motilal Oswal and Emkay have upgraded to Buy/Outperform, while Nuvama maintains Reduce. The stock is at sub-1x P/BV, suggesting value. However, the promoter stake overhang, West Bengal geographic concentration, and history of NPA recurrence make this a high-risk recovery play. Suitable for investors with 2+ year horizons and high risk tolerance.

What happened to Bandhan Bank in March 2026?

In March 2026, Bandhan Bank shares crashed nearly 10% and hit a lower circuit after reports emerged that promoter Bandhan Financial Services is exploring exit options for long-term investors (GIC Ventures, IFC). The potential block deal at a discount raised concerns about near-term selling pressure. The promoter must reduce its stake to 26% by 2030 per RBI norms.

What is Bandhan Bank’s NPA ratio in 2026?

In Q3 FY26 (December 2025), Bandhan Bank’s GNPA ratio improved significantly to 3.33% from 5.0% in Q2 FY26 — partly aided by bad loan sales to ARCs. Net NPA fell to 0.99%. However, fresh slippages from the EEB (MFI) portfolio remain elevated at 7.3%, indicating stress is not fully resolved.

What is Bandhan Bank’s promoter holding?

Bandhan Financial Services (promoter) holds approximately 40% of Bandhan Bank. RBI requires the promoter to reduce to 26% by 2030. This mandatory dilution creates a recurring overhang, as each block deal or institutional placement can pressure the stock. The company is exploring IPO of Bandhan Financial Services or private stake sales to long-term investors.

What is Bandhan Bank’s recovery catalyst?

Key catalysts: GNPA falling below 3% sustaining for two quarters, NIM recovery above 6.2%, ROA recovering toward 1%+, promoter stake sale completing with minimal market disruption, and successful scaling of home loans and MSME credit to reduce MFI dependence. Any combination of these could trigger re-rating from current 0.97x P/BV.

What is Bandhan Bank’s dividend yield and valuation?

Bandhan Bank’s P/BV ratio has fallen below 1x (0.97x as of late March 2026), the first time in its listed history. P/E stands at approximately 23.7x — distorted by suppressed earnings. ROE is 4.1% and ROA is 0.52%. The stock does not pay a significant dividend. The investment case rests on value recovery, not income.

Investments in securities are subject to market risk. Please read all related documents before investing. This content is for educational purposes only and does not constitute investment advice.