Crisil puts IndusInd Bank's long-term debt instrument on 'rating watch'

Rating agency says there has been no 'material outflow' in lenders deposits in two months

CRISIL Ratings has put IndusInd Bank’s long-term debt instruments on ‘watch with negative implications’, citing the private-sector lender’s review of its microfinance (MFI) business and the resignation of two top executives.

 

The bank’s long-term instruments include Rs 4,000 crore of Tier-II and Rs 1,500 crore of infrastructure bonds. CRISIL said the rating action follows the resignation of top two key managerial personnel and disclosure that the bank’s internal audit department is reviewing the MFI business to address concerns brought to its attention during finalisation of accounts. Separately, the bank had in March disclosed discrepancy in accounting of derivatives.

 

IndusInd Bank’s shares closed 0.94 per cent lower at Rs 825.35 on the BSE.   

 

CRISIL noted that there has been no “material outflow” in IndusInd Bank’s deposits for the last two months. As on March 31, the bank had deposits of Rs 4.11 trillion and CASA (current account and saving account) ratio of 32.8 per cent. Deposits were at Rs 4.09 trillion and CASA at 34.9 per cent on December 31, 2024.

 

There has been some outflow in deposits by retail and small business customers. Such deposits stood at Rs. 1.85 trillion as on March 31, compared to Rs 1.89 trillion on December 31, 2024.

 

“CRISIL Ratings will monitor and engage with the management to understand the progress with regard to steps taken towards strengthening internal financial controls and to ensure stability and continuity of operations. Further, the impact on profitability and changes in deposit profile will be closely monitored”, said the domestic agency. 

 

IndusInd, on March 10, told exchanges that an internal review had found discrepancies in its derivatives portfolio and this would have an “adverse impact” of 2.35 per cent on its net worth as of December 2024.

 

The bank said on April 15 that PwC, engaged by the lender’s board to validate the findings of the internal review, had identified discrepancies in its derivatives portfolio and estimated a negative impact of Rs 1,979 crore as of June 30, 2024. Based on PwC’s report, the bank said the discrepancies will have an adverse post-tax impact of 2.27 per cent on its net worth as of December 2024. 

 

Grant Thornton, an independent professional firm appointed by the board to determine the cause for discrepancies in the derivative portfolio, identified incorrect accounting of internal derivative trades — particularly in cases of early termination — led to the recording of notional profits and that resulted in accounting discrepancies. According to the firm’s assessment, the cumulative adverse accounting impact on the profit and loss account of the bank as of March 31, 2025 will be Rs 1,959.98 crore, said IndusInd.

 

“The net impact (post tax) was similar to the initial estimated impact by the bank management. CRISIL Ratings had earlier estimated that the bank’s capital adequacy and annualised pre-provisioning profitability could absorb this impact,” said the rating agency.