IndusInd Bank Reports ₹2,329 Crore Setback; Interim Management To Investigate In Depth
New Delhi/Mumbai: Fraud-hit IndusInd Bank on Wednesday reported a Rs 2,329 crore loss for the March quarter, its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices.
The fresh slippages galloped to Rs 5,014 crore, largely due to the microfinance book, where a Rs 1,800-crore incorrectly classified stress was unearthed and reported as a gross non-performing asset, and also some stress in the two-wheeler segment.
Starting with a March 10 disclosure about a potential hit to the networth because of incorrect recognition of derivative trades over the last two years, the last two months have been tumultuous for the Hindujas-promoted lender, and have also witnessed the immediate resignation of chief executive Sumant Kathpalia and his deputy Arun Khurana amid allegations of insider trading as well.
In the March quarter, the bank took impact of all the irregularities brought to the notice, including a Rs 1,960 crore hit from incorrect recognition of derivative trades, cumulative interest income reversal of Rs 674 crore due to incorrect accounting, disclosed a Rs 172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, set off Rs 595 crore of incorrect manual entries posted as "Other Assets" and "Other Liabilities" in the past, and also recognized the higher slippage.
Its management, now led by veteran banker Sunil Mehta in a non-executive role, affirmed that all the shortcomings have been taken on board and sought to assure that there will not be any trouble in the future as it goes about "reinvigorating" the bank.Mehta said based on the reviews that have been done, all the issues have been duly identified, addressed and disclosed to all the stakeholders."... the financial impact of all the issues that we have declared has already been undertaken in financial year 2024-25," Mehta said in a post-results conference with analysts, insisting that it starts FY26 with a clean slate.
The bank discontinued its practice of interacting with reporters post-results.He said that it is "unfortunate and painful" to see the lapses in governance, and affirmed the board's resolve in addressing all the governance-related discrepancies. The board was not informed about the lapses in the past, he said.The process for identifying Kathpalia's successor is in advanced stages, Mehta said, adding that the board is on the lookout for a leader with a strong ethical foundation.
Accountability for all the lapses will be fixed even as the bank goes through the process of getting back to business as usual, he said, adding that central government has been informed about the shortcomings.The bank management insisted that adjusted for the one-time hits that it had to take, IndusInd Bank franchise is strong and it performs well on other parameters.The fresh slippages included Rs 4,794 crore from the consumer book, which saw deterioration in the asset quality of microfinance and two-wheeler loans front.
The bank also witnessed a huge jump in write-offs at Rs 1,816 crore as against Rs 984 crore in the quarter-ago period.The overall gross non-performing assets ratio shot up to 3.13 per cent as of March 31, as against 2.25 per cent in the quarter-ago period and 1.92 per cent in March 2024. The overall provisions more than doubled to Rs 2,522 crore from Rs 950 crore in the year-ago period.On the microfinance front, the management said slippages will be elevated in FY26 as well but things will move towards stabilization from the second half onwards. Already, there have been reports of a bettering in collection efficiencies and the crisis in Karnataka is also ebbing, they said.
The core net interest income declined 43 per cent on-year to Rs 3,048 crore on the back of a 2 percentage point narrowing in the net interest margin at 2.25 per cent and a 1 per cent growth in advances.The corporate loan book declined 16 per cent on-quarter to Rs 1.43 lakh crore, and the management explained the same as a tactical call for maintaining liquidity buffers.The other income declined by 72 per cent on year to Rs 709 crore during the January-March period.
Going ahead, the bank will focus on secured consumer and small business loans, and will take a measured stance on the corporate loans, the management said.Contrary to fears, deposits have been stable on-quarter though the share of the low-cost current and savings accounts declined during the quarter to 33 per cent.The bank has been able to maintain its liquidity buffers, with the liquidity coverage ratio being around 139 per cent till Tuesday, the management said.
For 2024-25, IndusInd Bank reported over 71 per cent drop in net profit to Rs 2,576 crore against Rs 8,977 crore in FY24. The bank's net Interest Income for FY 25 was at Rs 19,031 crore against Rs 20,616 crore in FY24.Provisioning during FY'25 rose to Rs 7,136 crore, from Rs 3,885 crore in FY'24.The bank's overall capital adequacy stood at 16.24 per cent with the core buffer at a comfortable 15.10 per cent, which led the management to insist that it has the resources to grow.The IndusInd Bank scrip closed 1.39 per cent down at Rs 771.10 a piece on the BSE on Wednesday as against gains of 0.51 per cent on the benchmark.
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