By Mahesh Nayak
The accounting discrepancies in the derivatives and micro-finance portfolio continues to cast a shadow on IndusInd Bank with the private sector lender registering its worst-ever performance in Q4 FY25.
In its March quarter results announced on Wednesday, IndusInd reported a loss of Rs 2,236 crore — the first time in 19 years — due to a provision of Rs 2,522 crore for the accounting discrepancies. This was significantly higher than Bloomberg estimates of Rs 203 crore loss. Last year, in the corresponding quarter, the bank had posted a profit of Rs 2,347 crore while in the previous quarter, it registered a profit of Rs 1,402 crore.
The net interest income (NII) stood at Rs 3,048 crore for the quarter, down 43% compared to Rs 5,376 crore in the year-ago period.
The net NPA rose increased to 0.95% compared to 0.68% as on December 31, 2024.
As of March 31, the deposits were flat at Rs 4,10,862 crore compared to Rs 4,09,438 crore as of December 31, 2024.
The private sector bank has been facing significant challenges over its accounting irregularities, fraud in its microfinance portfolio, and concerns over balance sheet disclosures. In an exchange statement, the bank also stated that the internal audit department reported on May 20, 2025, that Rs 172.58 crore was incorrectly recorded as fee income in the microfinance business over three quarters ending December 31, 2024, and was reversed in Q4 of FY25.
Chairman Sunil Mehta, who addressed concerns regarding discrepancies, stated that the board was not informed about the discrepancies previously and is now taking all necessary steps to address them. The bank also said that the board is at an advanced stage in the selection process (of CEO) and is confident that recommendations will be submitted to the Reserve Bank of India before June 30.
The bank’s share price fell 1.01% to close at Rs 774 a share on Wednesday in anticipation of losses.
For the full year ended March 31, 2025, IndusInd Bank reported a 70% fall in its net profit to Rs 2,643 crore from Rs 8,950 crore a year ago and net interest income of Rs 19,031 crore was down 8% from Rs 20,616 crore in FY24.
“This is the first time several operational and governance challenges have emerged with the bank acknowledging the lapses across multiple areas, including derivative accounting losses, rising NPAs, and provisions in the Microfinance (MFI) segment, interest income misstatement, and alleged insider trading,” said Prashant Tapse, Head of Research at Mehta Equities.
He believes these issues mark a significant deviation from the bank’s historical operating discipline and create uncertainty about future business performance. “While it is difficult to precisely gauge the long-term impact, early signs are already visible with operational metrics starting to deteriorate, with net advances declining, particularly in corporate banking. The CASA ratio fell to 32.8% as of March 31, 2025, from 34.9% in December 2024, indicating a shift toward costlier term deposits.