Moody's downgrades IndusInd credit profile to 'ba2', flags control lapses

Moody's cuts IndusInd Bank's standalone credit profile citing weak internal controls, derivative accounting discrepancies, and leadership exits without succession plan

Global rating agency Moody’s on Friday downgraded the standalone credit profile of IndusInd Bank from "ba1" to "ba2", citing weaknesses in its internal controls highlighted by discrepancies in derivatives accounting and inadequate management oversight.

 

The agency also raised concerns over the bank’s medium-term strategy, pointing to the resignation of senior leadership without adequate succession planning, it said in a late-night statement.

 

“We consider these issues as governance risks under our Environmental, Social and Governance (ESG) framework. Consequently, we have lowered the bank’s Governance Issuer Profile Score to 4 from 3 and have made a negative corporate behaviour adjustment in the bank’s standalone assessment,” Moody’s said.

 

 

It affirmed IndusInd’s "Ba1" long-term foreign currency and local currency bank deposit ratings, citing the bank’s strong capital position, core profitability, and adequate liquidity, which will help mitigate near-term risks to its funding and asset quality.

 

However, Moody’s revised the rating outlook from "stable" to "negative", reflecting the potential for further deterioration in the bank’s solvency, funding, or liquidity position as it works to stabilise operations and define its strategy under a new management team.

 

Friday’s rating action concludes the review for downgrade of the Baseline Credit Assessment (BCA) and adjusted BCA initiated on 17 March 2025, Moody’s added.

 

At the end of April 2025, IndusInd Bank’s managing director and chief executive officer, along with the deputy CEO, resigned following the completion of an external agency’s review into discrepancies in accounting for derivative transactions.

 

While the external agency’s estimate of the one-off loss was in line with the bank’s internal estimate reported on 10 March 2025, Moody’s said the episode underscores lapses in internal controls.