Care Ratings stated that the reaffirmation of the rating assigned to the certificate of deposit (CD) programme of IndusInd Bank Limited (IBL) factors in comfortable capitalisation levels and growing franchise of the bank with focus on retail lending, earning higher yield on advances.

While IBL has historically maintained a healthy earnings track record, profitability moderated in 9MFY25 due to elevated credit costs and a rise in deposit rates. CARE Ratings expects earnings in Q4FY25 to remain subdued due to one-time adjustments from derivative accounting discrepancies and potential implications arising from the ongoing review of the microfinance (MFI) portfolio.

The rating also considers IBL's moderate resource profile, which has relatively higher proportion of bulk deposits. Asset quality moderated considering ongoing industry related stress in microfinance segment, which contributed 9% to the advances as on 31 December 2024 (down from 11% as on March 31, 2024) resulting in an increase in gross non-performing assets (GNPA) to 2.25% from 1.92% over the same period.

CARE Ratings takes note of the lapses in the internal financial controls following the derivative accounting discrepancies identified in FY25, which will also adversely impact its earnings in Q4FY25.

With resignations of both the managing director & CEO and the deputy CEO in April 2025, the progress of management transition, succession and stabilisation of operations will remain a key monitorable, notwithstanding the setting up of a committee of executives to manage day-to-day operations under the supervision of a board-level oversight committee until a new MD & CEO is appointed.

Per the bank's disclosure on 22 April 2025, the bank has roped in Ernst and Young (E&Y) to assist its internal audit department to examine certain concerns in the microfinance business, which have been brought to its attention in finalisation of accounts.

Any adverse outcome in this matter can affect IBL's profitability and hence would remain an additional monitorable.

Indusind Bank (IBL) is a new-generation private-sector bank promoted by the Hinduja group. IBL is the fifth-largest private bank in India in terms of total assets and total business as on 31 December 2024. The bank has a pan-India presence with 2,984 bank branches, 3772 branches of its wholly owned subsidiary BFIL, 300 vehicle finance marketing outlets, and 2,993 ATMs as on 31 December 2024. It also has representative offices in Dubai, Abu Dhabi, and London.

The scrip had gained 0.26% to end at Rs 782.30 on the BSE on Friday.

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