IndusInd Bank's risk management, leadership under scanner: Moody's

Yes Bank's profitability remains lower vis-a-vis private peers

Global Rating agency Moody’s on Wednesday said it was reviewing the risk management capabilities, including the leadership transition, at IndusInd Bank, private sector lender grappling with lapses in accounting for derivative transactions.

 

“The financial impact of the derivatives losses is quite manageable considering IndusInd Bank’s strong capital. But it is really the risk management capabilities of the bank, which is what we are watching out for in terms of the review,” said Alka Anbarasu, Associate Managing Director, Moody’s.

 

In a recent filing with Stock exchanges, IndusInd Bank had said that it has received the report from the external agency which identified discrepancies relating to derivative deals. The report has quantified the negative impact of the above at ₹1,979 crore as of June 30 2024.

   

In March 2025, Moody’s placed baseline credit assessment (BCA) on review for downgrade in the backdrop of the bank’s revelations about the inadequate internal controls in accounting for derivative transactions.

 

The outlook on IndusInd’s long-term ratings remains stable. At present, the rating is “Ba1” for long-term (LT) foreign currency (FC) and local currency (LC) bank deposits.

 

 

Referring to another private lender Yes Bank, Anbarasu of Moody’s said while the lender has cleaned up its books, its profitability remains low compared to the private sector lender’s counterparts in India.

 

The profitability will be monitorable as it was linked to the bank’s ability to raise external capital. The Return On Assets (RoA) was around 70 basis points of Yes Bank. The ROA’s of comparable private bank’s is more than 1.5 per cent.

 

Yes Bank has been rehabilitated after the default that took place a few years ago with the new shareholders coming in. “We see quite a lot of perhaps clean-up of the old legacy book has also taken place,” Anbarasu added.

 

In July 2024, Moody’s had revised its outlook on Yes Bank from ‘stable’ to ‘positive’ on the expectation of a gradual improvement in its depositor base and lending franchise.  It affirmed ‘Ba3’ long-term (LT) foreign currency (FC) and local currency (LC) bank deposit ratings.

 

Moody’s outlook for India’s banking system remains stable. It expects a favourable operating environment for banks in India, driven by government capital expenditure, tax cuts for middle-income groups, and monetary easing to boost consumption.