Detailed Rationale

Crisil Ratings has removed its rating on the long-term debt instruments of IndusInd Bank Ltd (IndusInd) from ‘Rating Watch with Negative Implications’ and has reaffirmed the rating at ‘Crisil AA+’ while assigning it a ‘Negative’ outlook. Further, Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the short-term debt instruments of the company.

 

The long-term rating was placed on ‘Watch negative’ on May 7, 2025, following the resignation of top two managerial personnel as well as disclosure of a review being conducted on the bank’s microfinance business by an internal audit department to examine few concerns, brought to attention during finalisation of accounts. Earlier, on March 10, 2025, the bank had disclosed discrepancy in the accounting of derivatives.

 

The watch resolution takes into account clarity with respect to the appointment of the Managing Director and Chief Executive Officer (CEO) and the expectation of no further negative impact in the financial statements on account of lapses in internal financial controls. On August 4, 2025, the bank intimated the appointment of Mr. Rajiv Anand as the Managing Director and CEO for a period of three years from August 25, 2025. Further, the Board of Directors have taken various steps including the setting up of a dedicated Process Management Office, amongst others to strengthen processes and internal financial controls.

 

The ‘Negative’ outlook reflects the modest overall profitability of the bank. The return on assets (RoA) is likely to remain modest over the next few quarters amidst asset quality challenges particularly in the micro loan segment on account of industry wide stress. Improvement in the profitability metrics by the end of fiscal 2026 and sustenance of the same will be critical. Further, any material impact on business and sustained weakening in asset quality and/ or earnings profile as well as sustained outflow in deposits will remain key monitorables in the near to medium term. Moreover, while Crisil Ratings understands from the management that no further financial impact, arising on account of lapses in internal financial controls and otherwise, is being envisaged in the coming quarters, same will also remain a key monitorable. Crisil Ratings will also continue to engage with the management to understand business strategies going forward as well as progress with regard to steps taken towards further tightening internal financial controls.

 

During the first quarter of fiscal 2026, while the loan book for the microfinance business (which accounts for ~8% of total advances as on June 30, 2025) declined by ~6% quarter-on-quarter, it grew by ~1.3% for other retail assets (accounting for ~52% of the loan book). The corporate loan book (~40%) also shrunk by ~7.7% in the last quarter in line with the short-term growth strategies adopted by the bank. With respect to the liability franchise, the bank had deposits of Rs 3.97 lakh crore and current account and saving account (CASA) ratio stood at 31% as on June 30, 2025, as against Rs 4.11 lakh crore and 32.8% respectively, as on March 31, 2025. However, there has been no major outflow in deposits from retail and small business customers during this period. These deposits stood at ~Rs 1.84 lakh crore as on June 30, 2025, as against ~Rs 1.85 lakh crore as on March 31, 2025. The bank continues to maintain excess liquidity to take care of any contingencies. During the first quarter of fiscal 2025, the average liquidity coverage ratio (LCR) was healthy at 141% and surplus liquidity at Rs 53,131 crore.

 

On asset quality however, the bank’s gross NPA increased to 3.64% as of June 30, 2025, from 3.13% as on March 31, 2025, and 1.9% from March 31, 2024, primarily driven by higher slippage in the microfinance institutional (MFI) loans in line with industry challenges. This, along with modest incremental business, has impacted profitability, with RoA at 0.4% (annualized) in the first quarter of fiscal 2026 as against RoA of 0.5% in fiscal 2025 and 1.8% in fiscal 2024. Nevertheless, pre-provisioning profit was adequate at ~Rs 2,568 crore in the first quarter of fiscal 2026 as against ~Rs 10,661 crore in fiscal 2025.

 

The ratings continue to reflect healthy capitalisation of the bank, with a high core equity ratio and adequate pre-provisioning profitability. However, these strengths are partially offset by modest asset quality and resource profile.

Analytical Approach

Crisil Ratings has evaluated the consolidated business and financial risk profiles of IndusInd

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Healthy capitalization

Capitalisation metrics are healthy, as reflected in common equity tier 1 (CET1) ratio and overall capital adequacy ratio (CAR) of 15.48% and 16.63%, respectively, as on June 30, 2025. Additionally, net worth was healthy at Rs 65,515 crore, with net worth/ net NPA ratio of nearly 17.6 times as on June 30, 2025. The bank should remain well-capitalised, supported by steady accrual and commitment from the promoters, to infuse support via equity, if required.

 

Adequate pre-provisioning profit; sustenance to be monitored

The bank reported pre-provisioning profit of Rs 2,568 crore in the first quarter of fiscal 2026 and Rs 10,661 crore in fiscal 2025, as against Rs 15,864 crore in fiscal 2024. The pre-provisioning profits as a percentage of average assets remain adequate, albeit moderated to 1.9% during the first quarter of fiscal 2026 as against 2.1% in fiscal 2025 and 3.3% in fiscal 2024. The Net Interest Margin moderated to 3.4% (annualised) in the first quarter of fiscal 2026 from 3.7% in fiscal 2025 and 4.2% in fiscal 2024. The operating expenses as a percent of average total assets remained stable at 3.1% in the first quarter of fiscal 2026 and fiscal 2025. Nevertheless, the ability to sustain profitability at comfortable levels remains a key monitorable.

 

Weaknesses:

Asset quality - a key monitorable

The bank's asset quality remains modest, with gross NPA increasing to 3.13% as on March 31, 2025, from 1.9% from March 31, 2024. This further increased to 3.64% as on June 30, 2025. The increase was primarily driven by slippage in the microfinance business due to industry wide stress, which accounts for 8% of total advances as on June 30, 2025. However, slippages are expected to reduce, leading to an improvement in asset quality.

 

The gross NPAs of the microfinance business stood at 16.39% as on June 30, 2025, as against 13.18% as on March 31, 2025, driven by industry wide issues and decline in MFI loan book. In absolute terms as well, the gross NPA of microfinance business stood at Rs 5,298 crore as on June 30, 2025, from Rs 4531 crore as of March 31, 2025. The gross NPA for vehicle finance (~29% of the loan book) was ~2% as on June 30, 2025, as against 1.6% as on March 31, 2025. The net slippage for this segment, however, has improved.

 

As on June 30, 2025, corporate and commercial banking advances made up 40% of the bank’s total advances. Of the total corporate advances, nearly ~76% comprised of borrowers with a credit rating of A- or higher, while the share of borrowers having a credit rating of BBB+ has remained sizeable at ~24% as on June 30, 2025. In the corporate segment, the bank has relatively higher exposure to non-banking finance companies (other than housing finance companies), real estate developers, gems and jewellery segments, amongst others.

 

Nevertheless, the bank has maintained adequate provision coverage of 70% towards gross NPAs as on June 30, 2025. However, improvement in overall asset quality metrics remains a key monitorable.

 

Moderate resource profile

Bank deposits stood at Rs 3.97 lakh crore as on June 30, 2025, as against Rs 4.11 lakh crore as on March 31, 2025, and Rs 4.09 lakh crore as on December 31, 2024. The CASA ratio stood at 31% as on June 30, 2025, as against 33% as on March 31, 2025. The size of retail deposits and deposits from small business customers remained stable at 46% and stood at Rs 1.84 lakh crore as of June 30, 2025, as against Rs 1.85 lakh crore as on March 31, 2025 (as against Rs 1.89 lakh crore as on December 31, 2024).

 

Moreover, reliance on bulk deposits remained high, with the top 25 depositors constituting 16.49% of total deposits as on June 30, 2025, however it has been progressively reducing over the years. Thus, the bank’s ability to sustain its retail deposit base and steadily optimise deposit rates remains a key factor. Also, any higher-than-expected outflow in deposits remains a monitorable.

Liquidity: Strong

Liquidity remains comfortable with an average LCR of 141% for the quarter ended June 30, 2025. Furthermore, liquidity also benefits from access to systemic sources of funds such as the liquidity adjustment facility from the Reserve Bank of India, and access to the call money market. However, any huge outflow of deposits will be a key monitorable.x

Outlook: Negative

The ‘Negative’ outlook reflects the expectation of modest overall profitability of the bank over the next few quarters. 

Rating Sensitivity Factors

Upward factors

• Sustained improvement in the earnings profile
• Improvement in resource profile with higher share of retail deposits and lower cost of deposits vis-à-vis peers
• Continued growth momentum marked by comfortable asset quality metrics and strong capital position with CET1 ratio (including capital conservation buffer or CCB) reported to be above 13%, on a sustained basis.

 

Downward factors

• Any material impact on business and sustained deterioration in asset quality and/ or earnings profile
• Decline in capital adequacy ratios (including CCB) with CET I remaining below 11% on a sustained basis
• Sustained outflow of deposit

About the Company

IndusInd is a new-generation private-sector bank; it commenced operations in 1994. The bank has a pan-India presence, with around 6914 branches (including 3804 branches of Bharat Financial Inclusion Ltd) and 3052 automated teller machines (ATMs) as on June 30, 2025. It also has representative offices in Dubai, Abu Dhabi and London. The bank has multilateral ties with other banks, ensuring access to more than 95,000 ATMs for its customers. It has four divisions: corporate and commercial banking, consumer banking, global markets group, and transaction banking.

Key Financial Indicators

As on / for the period ended	Unit	June 2025	March 2025	March 2024	March 2023	March 2022
Total assets	Rs crore	539,552	5,54,107	515,094	457,837	401,967
Total income (net of interest expense)	Rs crore	6,797	26,721	30,012	25,765	22,346
Profit after tax	Rs crore	604	2,575	8,977	7,443	4,805
Gross NPA	%	3.64	3.13	1.9	2.0	2.3
Overall capital adequacy ratio	%	16.6	16.24	17.2	17.9	18.4
Return on assets	%	0.4*	0.5	1.9	1.7	1.3

*annualised

Any other information: Not Applicable