IndusInd Bank bets on small loans and retail deposits for recovery

Mumbai: IndusInd Bank is banking on its commercial vehicle (CV) and microfinance portfolios to regain lost ground, as the lender attempts to move past accounting issues and leadership transition, managing director and chief executive officer (CEO) Rajiv Anand said.

With the new leadership team in place, which management is confident of, the bank believes that strong businesses on the commercial vehicle and microfinance sides will help it grow in line with the system next year.

“We are seeing that incremental disbursals on our microfinance book are behaving much better than what we have seen in the very recent past. So we are very, very hopeful that things in the microfinance business, both in terms of growth as well as slippages, will look much better than where we are today, and the commercial vehicle business continues to be a steady performer,” Anand said in the post-December quarter earnings call with the media on Friday.

During the quarter ended December, IndusInd Bank’s loan book fell 13% on year and 3% on quarter to ₹3.17 trillion.

The retail loan book, which forms 51% of the bank’s overall loan portfolio, fell 3% on year to ₹1.61 trillion. The commercial vehicle loan book, which accounted for 35% of the total share, rose 5% year-on-year to ₹98,196 crore. While consumer banking rose 18% on year to ₹31,057 crore, wholesale banking fell 28% to ₹1.12 trillion. microfinance institution (MFI) loans plunged 46% to ₹17,669 crore.

While average advances declined sequentially due to continued rundown in micro-loans and calibration in the wholesale book, disbursements remained robust in vehicle finance, retail and granular corporate lending.

Anand said growth in the micro, small and medium enterprise (MSME) segment is expected to strengthen going forward, which would also support fee income and help deepen the liability franchise.

Incremental disbursements in the MFI segment are now exhibiting better repayment behaviour, he said, raising expectations that both growth and slippages will improve from the March quarter onwards.

Liability business

On the liability side, the bank’s deposits fell 4% on-year and 1% on a quarterly basis to ₹3.93 trillion.

“Our intent is to grow in line with the market on both assets and liabilities in 2026-27, and as we think about granulizing our liabilities, the intent is to grow our liability franchise faster than our bulk deposits,” Anand said.

He also said that it will have a positive impact on our cost of funds and will support building a less risky, volatile asset side of the balance sheet, he said, adding that the bank’s ambition is to deliver 1% return on assets on an exit basis over the next 12-18 months.

He said management is investing significant time and effort into strengthening the retail liability business through organizational changes, process improvements and enhanced branch-level productivity.

On capital, Anand said the bank’s capital adequacy remains comfortable and sufficient to support near-term growth, though a capital raise could be considered in future as growth picks up.

Addressing regulatory concerns, the bank clarified that the Serious Fraud Investigation Office is probing certain past and present officials and not the bank itself. Separately, an audit qualification at subsidiary Bharat Financial Inclusion relates to legacy issues, with any financial impact already provided for in previous years, and the ongoing probe is focused on staff accountability.