The share price of Bandhan Bank jumped 7 percent on Monday after the Assam government announced relief as well as incentives for MFI loans. The announcements are expected to partially address one of the key concerns of the lender's elevated stress pool in Assam.

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The stock rose as much as 7 percent to its day's high of Rs 330 per share on the BSE.

The government of Assam plans to grant up to Rs 8,500 crore -- 70 percent of state MFI loans -- to bail out borrowers. The state government proposes providing support to 90 percent of the 2.6 million MFI borrowers in the state through cash-grant of up to Rs 25,000.

The grant will be available to borrowers where (1) total borrowing is up to Rs 1,25,000, (2) there are not more than 3 lenders and (3) borrower was standard up to December 2020.

As per analysts, this move will be positive for lenders as it clears dues and overhang on collections.

"Bandhan will benefit as state forms 12 percent of MFI loan and faced higher stress; still FY22 may see 7 percent negative impact from weaker topline due to repayment," brokerage house Jefferies said in a note.

Credit Suisse upgraded the stock to 'outperform' and raised its target to Rs 300 per share. "This package will aid recoveries and credit costs," it said.

CLSA also said that this move will provide significant relief for Bandhan Bank in Assam.

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