IndusInd Bank reports Rs 437 cr loss in Q2 due to higher MFI provisioning

Private-sector lender IndusInd Bank on Saturday reported a net loss of Rs 437 crore for the July–September quarter (Q2FY26), primarily due to higher provisions in its microfinance portfolio. 

 

In the same quarter last year (Q2FY25), the bank had reported a net profit of Rs 1,331 crore, while in the previous quarter (Q1FY26), it posted a net profit of Rs 604 crore.

 

“The accelerated provisions on microfinance have resulted in a net loss”, said Rajiv Anand, MD & CEO, IndusInd Bank, adding that they have written off Rs 1,579 crores of microfinance loans and increased coverage on the residual MFI non-performing assets (NPAs).

 

“The financial performance of this quarter was impacted due to sharp reductions in the microfinance business and lack of treasury gains. This was partly offset by improvement in cost of funds as well as containing operating expenses,” he further said.

 

The bank’s net interest income (NII) dropped 18 per cent Y-o-Y to Rs 4,409 crore, while other income was down 20 per cent Y-o-Y to Rs 1,651 crore. Net interest margin (NIM) – a measure of profitability of bank’s – of the lender stood at 3.32 per cent, down 76 bps from the same period last year, and 14 bps from the previous quarter.

 

Provisions and contingencies of the lender jumped 45 per cent Y-o-Y to Rs 2,631 crore. In the previous quarter, the bank’s provisions and contingencies stood at Rs 1,760 crore.

 

The bank reported Rs 2,537 crore worth of fresh slippages, of which Rs 2,473 crore was from the consumer banking book, and the rest from the corporate book. “Microfinance slippages remained elevated during the quarter as we undertook accelerated positioning to brutally rationalise the outstanding NPA book,” Anand said.

 

Asset quality of the lender saw a marginal improvement, with gross non-performing assets (NPAs) at 3.60 per cent, as against 3.64 per cent in the previous quarter, and net NPA stood at 1.04 per cent compared to 1.12 per cent in the previous quarter.

 

The lender’s advances declined 9 per cent Y-o-Y and 2 per cent sequentially to Rs 3.25 trillion in Q2, while deposits 6 per cent Y-o-Y and 2 per cent sequentially to Rs 3.89 trillion.

 

“During the quarter, we consolidated our balance sheet by letting go of wholesale deposits and cautious disbursements on microfinance. On advances, vehicle disbursements were impacted with deferment of purchases due to GST changes in the last quarter. We remain cautious on microfinance disbursements,” Anand said, adding that microfinance will continue to be an integral part of the bank's approach, especially meeting its financial inclusion and priority sector ambitions.

 

Anand also outlined that the bank will invest in building coverage and capabilities, particularly in the mid and small corporate sector.

 

He also highlighted that the traditional retail assets will be a key growth driver to build a universal banking franchise. While the bank will continue to grow in its domains, vehicle finance and microfinance, it sees huge opportunities to grow our retail asset businesses, he said.

 

Commenting on the several appointments as a part of the senior leadership of the bank, Anand said, “We have made progress on rebuilding our leadership team. This quarter saw the onboarding of several key leaders, including a new CFO, a legal counsel, head internal audit, and head business transformation, each bringing professional perspective and deep expertise.  We expect a few more senior leaders to join in the coming months, further enhancing our strategic depth and institutional capabilities”.

 

Speaking on the various probes being conducted by law enforcement agencies, Anand stated that everything that needed to be recognised has been recognised as at March 2025, as far as the financials are concerned. And, now the bank is working with the law enforcement agencies to take the prior matters to the logical conclusion. 

The bank had reported a net loss of Rs 2,329 crore in the January-March quarter (Q4FY25), as it substantially ramped up provisions and reversed incorrectly booked revenue and income entries linked to accounting discrepancies in the derivatives and microfinance segments discovered during the quarter.

 

Along with its worst-ever quarterly loss, the bank disclosed its board suspects that fraud may have been committed against the bank that could involve certain employees with significant roles in the bank’s accounting and financial reporting. Accordingly, the board has directed necessary steps be taken under applicable laws, including reporting to regulatory authorities and investigative agencies, and fixing the accountability of all persons responsible for these lapses.