IndusInd Bank’s Financial Health Remains Stable, Assures RBI

The Reserve Bank of India (RBI) has reassured depositors of IndusInd Bank regarding the financial stability of the institution, emphasizing that there is no need for concern amidst recent speculative reports. The central bank noted in a statement on Saturday that it is closely monitoring the bank’s financial health, which it described as satisfactory.

Deposits Show Positive Growth

As of December 2024, IndusInd Bank reported an impressive year-on-year growth of 11% in its deposits, amounting to Rs 4,09,438 crore. This figure reflects the bank’s robust position in the banking sector, underscoring its commitment to maintaining depositor confidence.

Internal Review and Impact on Financials

However, last week, IndusInd Bank disclosed a potential adverse impact of 2.35% on its net worth due to an internal review of its derivative portfolio. The review revealed that losses from derivatives could amount to approximately Rs 2,100 crore. This situation has raised concerns, but the RBI reassured stakeholders about the bank’s capital adequacy and coverage ratios. The capital adequacy ratio stands at a healthy 16.46%, with a provision coverage ratio of 70.20%, signifying sound financial underpinning.

Liquidity Coverage and Audit Engagement

The bank’s liquidity coverage ratio (LCR) was reported at 113% as of March 9, 2025, exceeding the regulatory requirement of 100%. In response to the internal discrepancies identified, IndusInd Bank has engaged an external audit team to conduct a comprehensive review of its systems and the associated impacts of the derivative transactions, which date back over the past five to seven years.

The RBI has mandated the bank’s board and management to complete the necessary remedial actions within the current quarter (Q4FY25), ensuring that all stakeholders are informed of the developments in a timely manner.

Market Reaction and Future Outlook

Following the bank’s disclosures, IndusInd shares experienced a decline of 1.84%, closing at Rs 672.10 on the Bombay Stock Exchange on Thursday. Financial analysts have predicted that the anticipated losses will compel the bank to report a quarterly loss in Q4FY25, while also potentially reducing the estimated return on assets (RoA) for FY25 from 0.9% by 30 basis points.

Despite the challenges posed by the derivative portfolio, the bank remains committed to rectifying the situation, continuing to prioritize transparency and strong governance.

IndusInd Bank’s assurance of its financial health suggests that while challenges exist, the bank is well-positioned to navigate through and uphold its obligations to depositors and stakeholders alike. The proactive steps being taken, in conjunction with RBI oversight, aim to restore confidence in the institution’s stability moving forward.