After the worst of the microfinance stress cycle is likely behind it, IndusInd Bank is looking forward to its next phase of growth. Rajiv Anand, Managing Director, tells Kshipra Petkar and Mahesh Nayak that the most important aspect occupying his mind is winning back the trust of all stakeholders. Excerpts:
What is the strategy for IndusInd 2.0?
We begin from a position of strength, with 17% capital adequacy and a relatively clean balance sheet. Our key growth engines are microfinance and commercial vehicle finance, with strong potential in SME, secured retail, gold and home loans. We are also focusing on granularising liabilities, improving the retail mix and cutting costs. As growth broadens and credit costs normalise, we aim to move towards a 1% ROA through disciplined execution across assets, liabilities and fees.
What stood out to you as strengths when you took over?
Two things- the capital position and our strong vehicle finance franchise. In vehicle finance, we are among the top three financiers for most major OEMs. Microfinance, despite recent challenges, remains profitable through the cycle and helps meet PSL (priority sector lending) and SMF (Social microfinance) requirements.
How will the new leadership help rebuild governance and investor trust?
The most important aspect and something that occupies my mind the most, is to win back the trust of our regulators, investors, depositors, and our employees. And really everything that we do is to ensure that we are achieving exactly that.
What changes do you want in the liability mix over the next year?
We plan to grow retail liabilities faster to reduce reliance on bulk deposits. We will also expand our government and trust business and strengthen transaction banking to boost current account balances from corporates and SMEs. As SME lending grows, it should naturally support liabilities given its healthy self-funding ratio.
Deposit mobilisation has been challenging industry-wide. How do you see this?
Household savings are under pressure as borrowing increases, and government savings are more efficient. Corporate India, however, is seeing strong cash flows. The objective is not to eliminate bulk funding, but to rebalance the liability mix — increase retail deposits and diversify the bulk depositor base.
How do you see the loan mix changing going ahead?
Currently, about 60% of the loan mix is retail and 40% wholesale. Within wholesale, roughly 40% is large corporate. Over time, we expect the large corporate component to decline and SME, mid-corporate to increase.
Home loans are competitive and low-margin. How will you approach this segment?
The super-premium segment is tightly priced. Our focus will be selective growth in premium and affordable housing segments where profitability is viable. Home loans also create cross-sell opportunities on the liability side.
What is the outlook for microfinance after Q3 stress?
At an industry level, conditions are improving, and that is reflected in our book. We operate two microfinance businesses — the traditional model and Bharat Superstore, which lends to kiranas. Both will continue to grow. Around 38% of the microfinance book is currently covered under the credit guarantee scheme (for incremental disbursals). By mid-next fiscal, we expect near full coverage.
How do you plan to bring down credit costs?
A large portion of the elevated credit cost comes from microfinance. We believe the worst of the microfinance cycle is behind us. There is also a denominator effect at play — as other lower-risk businesses grow, the overall credit cost will look healthier. Over time, we expect them to normalise closer to 1.5%, potentially over the next 36 months.
Are you open to acquisition financing and REIT lending following RBI guidelines?
We have a strong corporate banking franchise and will evaluate such opportunities selectively.
How do you see the unsecured book growing?
We are re-evaluating those businesses. We have unsecured exposure in personal loans and credit cards and are reviewing the underwriting standards and processes.
Do you have any plans to raise capital?
We do not foresee a need to raise equity in FY26 or FY27. However, in the next 12–24 months, we may consider raising capital. The quantum and structure — whether QIP, preferential, strategic or market issuance — are yet to be decided.
Are margins a concern?
The focus should not be solely on margins but on ROA. Even if margins soften slightly, cost reduction and credit cost normalisation should help build a more predictable and sustainable ROA.
Any headcount or branch expansion plans?
We are focusing on productivity rather than aggressive hiring, though we will recruit for specific roles. We are optimising our branch network and converting around 560 standalone commercial vehicle branches into full-service branches. This should support growth over the next 12–18 months.
How do you see your market share overall?
I would be very disappointed if our market share does not grow. I think this franchise deserves a much bigger market share than where we are today.