Shares of Bandhan Bank surged close to 9 percent to Rs 288.50 on the BSE in Tuesday's early deals after the Reserve Bank of India's (RBI) relaxed norms on microfinance lending. The norms will be implemented from April 1, 2022.

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At 1 pm, Bandhan Bank shares were trading at Rs 283.05, up 18.25 points, or higher by 6.89 percent on the BSE.

On Monday, the Reserve Bank of India issued master directives requiring all microfinance institutions to establish a board-approved policy for loan pricing.

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According to CS Ghosh, managing director and chief executive officer of Bandhan Bank, the RBI's microfinance loan structure will assist enhance microcredit penetration. According to him, the amended standards are expected to harmonise the regulatory frameworks of various types of lenders, ensuring better risk reduction and financial inclusion, PTI reported.

Jefferies has a "buy" call on Bandhan Bank shares with a price target of Rs 380. The brokerage believed that the new RBI norms are most positive for NBFC-MFIs and mildly so for banks like Bandhan Bank.

Also Read: RBI's new microfinance lending norms: All entities, banks, NBFC-MFIs brought under similar rules

However, according to the brokerage, concerns include additional deterioration of collections as a result of the Omicron wave, adverse regulations from the RBI's soon-to-be-released harmonised microfinance regulation framework, and a sluggish economic recovery.

CLSA has upgraded its rating on Bandhan Bank to "Buy" with a target price of Rs 340. The brokerage believes this is a turning point for the MFI business.

"The tough 3-4 years are behind, and it's better placed now cyclically. Coverage is improving, asset quality is stabilising and restructured book performance will be key," the brokerage added.

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