IndusInd Bank Swings Back Into Red with ₹437 Cr Loss in Q2 on MFI Stress

Private sector lender IndusInd Bank on Saturday reported a loss of Rs 437 crore in the September quarter, as it chose to identify and provide for additional stress in the microfinance portfolio.

The Hinduja group-promoted lender had reported a net profit of Rs 1,331 crore in year-ago period and Rs 604 crore in the preceding June quarter.

In March, it booked a loss of Rs 2,329 crore amid a crisis over shoddy corporate governance, wrongful accounting practices and executive maleficence.

Rajiv Anand, the newly-appointed chief executive and managing director of the lender, explained that it decided to go in for accelerated provisions and also did a Rs 1,940-crore write-off in the MFI book during the quarter.

A senior official told reporters that it had to set aside Rs 900 crore in additional provisions as a result of the move. Remaining part of the overall provision of Rs 2,631 crore was business as usual, the official added.

Before Anand took over, an interim management had asserted that all the incipient stress has been accounted for and the lender is starting the new fiscal with a clean slate.

When asked if more such moves await, where the bank decides to take additional provision which hits the profits, Anand did not answer in specific but said that it will continue to take measures to strengthen the balance sheet.

"There are enough levers with us to be able to grow. There is ample scope from a macro perspective as well. It is important for us to set the systems, controls and teams in place before we accelerate," Anand said, while sharing the future outlook.

Meanwhile, the bank also discussed that it has set up a project management group to provide oversight, and to ensure that necessary steps including strengthening of systems, processes, internal controls, minimization of manual accounting entries.

The bank has also initiated steps to assess roles and responsibilities, and also "fix accountability", it said, adding that over the next two quarters, it will also initiate disciplinary action against the erring officials as per the code of conduct of the lender.

IndusInd Bank continues to remain cautious on the microfinance lending business, but sees good opportunity to grow in its mainstay of vehicle finance, home loans despite the challenges posed by higher cost of funds and also corporate lending, Anand said.

For the reporting quarter, its core net interest income declined by 18 per cent to Rs 4,409 crore as loans contracted by 9 per cent and net interest margin compressed by 0.76 per cent to 3.32 per cent.

Other income was down 24 per cent to Rs 1,651 crore, and the deposit base declined by 6 per cent on-year.

From an asset quality perspective, it said gross slippages were almost flat when compared with the preceding quarter at Rs 2,537 crore, while gross non-performing assets ratio came down marginally to 3.60 per cent.

Overall capital adequacy stood at a comfortable level of 17.10 per cent, including the core buffer at 15.88 per cent.