IndusInd Bank recently announced a surge in non‑performing assets (NPAs) amounting to ₹7,600 crore, unveiled amidst a broader accounting review involving derivatives losses and interest misbookings. The revelations have triggered governance concerns and a drop in investor confidence.
What Has Been Disclosed
- ₹7,600 Cr in NPAs
Fresh slippages—primarily from the microfinance and SME segments—have pushed gross NPAs to 3.13% and net NPA to 0.95% as of March 2025 - Quarterly Losses from Derivatives
The bank recorded its first quarterly loss in 19 years (Q4 FY25), amounting to ₹2,329 crore, approximately 2.35% of net worth, stemming from derivative portfolio mismatches - ₹674 Cr Misbooked Interest
A review of the microfinance business flagged ₹674 crore wrongly recorded as interest across three quarters, fully reversed by January 2025 - ₹595 Cr in Unsubstantiated Assets
“Other assets” contained ₹595 crore of unverified entries, which were subsequently offset, prompting a forensic investigation by EY - Under‑Provisioning & Fee Irregularities
Additional issues include ₹172 crore misclassified as fee income, misclassification of microfinance loans, and under‑provisioning of ₹1,885 crore, raising concerns about internal control lapses
Market & Regulatory Fallout
- Stock Impact: Shares plunged close to 27% in March, erasing ₹78,000 crore in market cap, with investors spooked over declining NIMs and corporate governance timesofindia
- Analyst Downgrades: Brokerages cut FY26–27 earnings estimates by 15–45%, citing uncertainty from governance issues and high loan-loss provisions
- CEO and MD Resignations: Sumant Kathpalia and Deputy CEO Arun Khurana stepped down in April, acknowledging moral responsibility
What’s Next
| Key Steps | Details |
|---|---|
| Forensic Audit | EY investigating ₹600–700 crore microfinance errors |
| Regulatory Oversight | RBI and SEBI scrutinizing accounting processes and insider trades |
| New Leadership | Bank seeks a new CEO by June 30, 2025, to restore governance and regulatory compliance |
Why It Matters
- Investor Confidence: Delayed disclosures and steep slippages erode trust in the private lender.
- Systemic Risk Lessons: The scandal underscores the need for better internal controls in the banking ecosystem.
- Recovery Path: Clearing forensic audits, replenishing provisions, and appointing credible leadership are essential for stabilization.
