Bandhan Bank Limited (NSEI:BANDHANBNK) is selling its INR 7,750 million affordable home loan portfolio to Avenue Capital-backed Asset Reconstruction Company (India) Limited (Arcil) for INR 2,800 million in an all-cash deal, said people with knowledge of the transaction. This transaction highlights the emerging stress in lower-income groups, where customers are unable to pay INR 1 million - INR 1.2 million loans taken to buy their homes. Arcil won the Bandhan Bank portfolio at an unchallenged Swiss challenge auction held on December 27.

For the bank, the portfolio sale will equate to a recovery of 36%. Arcil and Bandhan Bank did not respond to ET's request for comments.