IndusInd Bank posted a net loss of ₹437 crore in the second quarter of FY26 (ended Sept 30, 2025), marking a sharp reversal from a net profit of ₹1,331 crore in Q2 of the previous year.
This decline comes amid falling core income and rising provisions, especially in the microfinance portfolio.
What Drove the Loss?
1. Drop in Net Interest Income (NII)
- NII fell ~18% year-on-year to ₹4,409 crore from ₹5,347 crore in Q2 FY25.
- Net interest margin (NIM) dipped to ~3.32% from 4.08% a year ago.
2. Surge in Provisions & Contingencies
- Provisions jumped ~45% year-on-year to ₹2,631 crore (from ~₹1,820 crore)
- Much of the increase stems from the microfinance portfolio and accelerated write-offs.
3. Asset Quality & Balance Sheet Trends
- Gross NPA ratio stood at ~3.60% as of Sept 30, 2025.
- Capital adequacy remained strong: CRAR ~17.10%, Tier-1 ~15.88%.
- But loans and deposits saw contraction: Advances down ~9% YoY, deposits down ~6%.
Why It Matters
- The drop from profit to loss signals underlying pressure on IndusInd’s business model — shrinking margins, higher risk costs, and competition in banking.
- Given the bank’s stature among India’s private lenders, these results raise concerns about sustainability of growth and profitability.
- For investors, this means heightened scrutiny of loan-book quality (especially microfinance), cost control, and management credibility.
- Despite the hit, the bank is reiterating it has “cleaned the slate”, taken provisions and is reinforcing controls — which may restore confidence if executed well. Moneycontrol
What to Watch Going Forward
- Microfinance portfolio health: Given provisions spiking here, trends in this segment will matter.
- Loan growth & margin recovery: Can NII/NIM stabilise or improve? Will advances pick up?
- Cost control: How will IndusInd manage its cost-to-income ratio and return to profitability?
- Asset quality trends: Watch NPAs, coverage, and write-off levels — any further deterioration would be a red flag.
- Management & governance: Given past accounting/control issues, investors will watch how the new leadership rebuilds trust.
Bottom Line
IndusInd Bank’s Q2 result marked a sharp turnaround into loss, driven by margin contraction and rising provisioning. While the fundamentals (capital, asset quality) remain manageable, the challenge ahead is to restore growth, profitability and investor confidence. For the bank and its stakeholders, the next few quarters will be critical in demonstrating a credible recovery path.
