Rating agency Crisil on Thursday placed long-term debt instruments of IndusInd Bank on ‘rating watch with negative implications’, due to recent resignations of two top executives and concerns over its microfinance (MFI) portfolio.
The instruments under watch include Rs 4,000 crore worth of Tier 2 bonds and Rs 1,500-crore infrastructure bonds, both currently rated AA+. Crisil, however, reaffirmed the bank’s short-term rating at A1+.
“The rating action follows the recent resignations of top two key managerial personnel of the bank as well as the disclosure that the bank’s internal audit department is conducting a review of the MFI business to examine certain concerns, which have been brought to its attention during finalisation of accounts,” said Crisil in a filing with the stock exchanges. “These developments will necessitate the bank to take measures to strengthen its internal financial controls which will be a key rating monitorable.”
It added that these developments will necessitate the bank to take measures to strengthen its internal financial controls which will be a key rating monitorable.
In March, Moody’s had placed IndusInd Bank‘s baseline credit assessment (BCA) under review for a possible downgrade.
Crisil rating action came after the bank announced accounting discrepancies in its derivatives portfolio. The private lender on March 10 announced that an internal review of its derivatives portfolio revealed discrepancies that could hit its net worth by approximately 2.35% as of December 2024. The bank later hired a professional firm to thoroughly investigate the discrepancies, identify their root cause, find any lapses, and fix accountability. The firm assessed the total impact on the profit and loss account at Rs 1,959.98 crore as of March 31, 2025.
Bank’s MD and CEO Sumant Kathpalia resigned on April 29 with immediate effect, taking moral responsibility for the accounting discrepancies in the bank’s derivatives portfolio. Deputy CEO Arun Khurana also stepped down with immediate effect on April 28.
Regarding MFI business, the rating agency said clarity is awaited on the nature of concerns raised and its potential impact on the business operations and profitability.
“Overall asset quality remains a key monitorable as there has been some increase in gross NPAs in recent quarters” said Crisil.
The MFI loan book of the bank, accounting for about 9% of total advances as on December 31, 2024, had decreased by about 16% during the first nine months of fiscal 2025 in line with industry trends. Gross NPAs of the MFI business increased to 7.05% as on December 31, 2024, compared with 4.53% as on March 31, 2024.
According to Crisil, there has been no material outflow in overall deposits so far over the last two months. As on March 31, 2025, the bank had deposits of Rs 4.11 lakh crore and CASA (current account and saving account) ratio of 32.8%, against Rs 4.09 lakh crore and 34.9%, respectively, as on December 31, 2024. However, there has been some outflows in deposits from retail and small business customers during this period. These deposits stood at Rs 1.85 lakh crore as on March 31, 2025, compared with Rs 1,89 lakh crore as on December 31, 2024. The liquidity coverage ratio stood at 136% as on March 31, 2025.
“The bank has maintained excess liquidity to take care of any contingencies,” it said. “Crisil Ratings shall continue to monitor the deposit profile of the bank over the near term.”
IndusInd Bank’s shares closed 1% lower at Rs 825 on the BSE.