IndusInd Bank net profit plunges 72% due to rise in retail bad loans

Bank posts Rs 604 crore Q1FY26 profit amid higher provisions, declining microfinance asset quality, and subdued core and non-core income

IndusInd Bank reported a 72 per cent year – on – year (Y-o-Y) decline in net profit to ₹604 crore in the first quarter of the financial year 2025-2026 (Q1FY26), due to higher provisions for retail loans, apart from lower income from both core and non-core operations.

 

In Q4FY25, the bank had reported a loss of ₹2,329 crore 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.

 

The bank’s net interest income (NII) declined 14 per cent Y-o-Y during the April-June period to ₹4,640 crore due to shrinking loan book. Sequentially, NII was up 52 per cent. Other income was down 12 per cent Y-o-Y to ₹2,157 crore.

 

 

The private sector lender’s net interest margin (NIM) declined 79 basis points (bps) Y-o-Y to 3.46 per cent, but increased 121 bps sequentially.

 

“We had two main objectives in this quarter (Q1FY26): first restoring trust in the institution as our primary and immediate responsibility, and secondly, ensuring continued execution of all core businesses of this bank. The board and the management remain committed towards these objectives,” said Sunil Mehta, Chairman, IndusInd Bank, adding that the bank has delivered results for Q1FY26, without any carryover from the last quarter irregularities. “The financial impact of the legacy issue is now behind us,” he said. 

 

“During Q1, the board and the management have spent considerable time and effort resolving the concerns relating to legacy, treasury and micro finance issues as identified in the previous quarter,” he added.

 

Provisions and contingencies of the lender increased 68 per cent Y-o-Y to ₹1,760 crore in Q1FY26, but sequentially, it was down 30 per cent. The bank reported fresh slippages to the tune of ₹2,567 crore in the quarter, with ₹2,322 crore coming from the consumer portfolio and the rest coming from the corporate portfolio. In the previous quarter, the bank’s fresh slippages were ₹5,014 crore.

 

As a result, the bank’s asset quality deteriorated, with gross non-performing assets (NPA), as a percentage of gross advances, increasing to 3.64 per cent at the end of June quarter, compared to 3.13 per cent at the end of March quarter.

 

The bank’s gross NPA ratio in the micro loan category jumped to 16.39 per cent in the quarter, with ₹5,298 crore worth of loans tagged NPA. The bank has also seen elevated stress in the small commercial vehicle segment, commercial equipment, and tractors. In the consumer banking segment, the bank’s gross NPA at the end of Q1FY26 stood at ₹9,281 crore and GNPA ratio stood at 4.74 per cent, compared to 4.08 per cent in the previous quarter.

 

Net NPAs also inched up to 1.12 per cent in the quarter as write offs and recoveries have come down during the quarter.

 

Its advances book saw a 4 per cent Y-o-Y and 3 per cent sequential decline in Q1FY26 to ₹3.33 trillion. The bank’s vehicle loan book, which is 29 per cent of the loan book, grew 7 per cent Y-o-Y, while microfinance book declined 23 per cent Y-o-Y and corporate book de-grew 16 per cent Y-o-Y.

 

Deposits of the lender declined marginally Y-o-Y to stand at ₹3.97 trillion. The share of current and savings account (Casa) deposits to total deposits fell from 37 per cent in June of last year to 31 per cent. However, the liquidity coverage ratio increased from 122 per cent to 141 per cent.