Bandhan Bank's business model is structured around a core tension that defines everything about the institution: the extraordinary profitability and social mission of microfinance lending on the asset side, and the challenge of building a sufficiently diversified and stable liability franchise to fund those assets at sustainable cost. The microfinance portfolio — group loans to women borrowers, primarily in eastern and northeastern India, disbursed through Joint Liability Groups (JLGs) — is the engine of Bandhan's economics. These loans, typically ranging from Rs 5,000 to Rs 1,50,000 per borrower, carry effective interest rates of 19–21% per annum under RBI's microfinance interest rate guidelines. At this yield, and with operating costs that have been refined over two decades of microfinance practice, the gross spread on the microfinance book is exceptional — far above the spreads achievable in secured retail lending or wholesale banking. The microfinance segment has historically generated NIMs (net interest margins) of 8–10% for Bandhan, compared to the 3.5–4.5% that large private sector banks achieve across their broader books. This yield premium reflects the genuine risk premium in unsecured microfinance lending to low-income borrowers, the high operating costs of doorstep collection and small-ticket disbursement, and the regulatory caps that, while constraining absolute yields, still allow for strong returns given Bandhan's low cost of origination in established markets. The JLG model — where groups of 5–10 women jointly guarantee each other's loans, creating peer-monitored credit discipline — reduces individual credit risk and enables low-cost collection through weekly group meetings rather than individual field officer visits. The liability side of Bandhan's business model has evolved significantly since banking conversion. In the first years after 2015, Bandhan's deposit growth was spectacular: the bank mobilized over Rs 20,000 crore in deposits within its first two years, drawing on the trust its microfinance borrowers and their communities had developed over the preceding 14 years. Many of Bandhan's early depositors were, paradoxically, the same women who borrowed from it — microfinance clients who had accumulated savings and trusted Bandhan to hold them safely. This unique trust-based deposit acquisition model is genuinely difficult to replicate. As the bank has grown, its deposit franchise has diversified beyond the microfinance community. Fixed deposits from retail savers in eastern India — attracted by rates that Bandhan has priced attractively to build the franchise — form the bulk of the deposit base. Current account and savings account (CASA) deposits, which represent zero-cost and near-zero-cost liabilities, have been growing but remain below the levels of mature private sector banks. Bandhan's CASA ratio has been in the 35–42% range in recent years, which is actually competitive with many mid-size private sector banks and reflects the deep savings relationship the bank has with its microfinance customer base. The secured lending segments — home loans (Gruh integration), MSME loans, and more recently personal loans — represent the diversification imperative. These products carry lower yields than microfinance (home loans at 8.5–10%, MSME loans at 12–15%) but bring portfolio diversification, longer loan tenors, collateral security, and customer relationships that extend into the affluent segments where deposit mobilization is more efficient. The Gruh-heritage home loan portfolio, concentrated in Gujarat and western India, has performed with credit quality that is dramatically better than the microfinance book — precisely because mortgage borrowers have collateral and formal income documentation. Fee income — from account maintenance, third-party insurance and investment distribution, and transaction banking — is a growing but still modest component of Bandhan's revenue mix. The bank has made deliberate investments in its wealth management capability, recognizing that its microfinance customers' children — the next generation of earners in Bandhan's core geographies — represent an underserved affluent customer segment with strong brand affinity for Bandhan.