IndusInd Bank: IndusInd Bank utilizes Rs 1,325 crore contingency buffer amid accounting lapses and bad loan underreporting

Such a buffer is like a rain check that lenders utilise against unexpected and unforeseen contingencies. In the March quarter, the bank’s provisioning and contingencies nearly tripled YoY to ₹2,522 crore.

“The reviews (by the bank) identified that over the first three quarters of FY2025, there was incorrect recording of interest income and fee income (in the microfinance book). The review has also identified the misclassification of certain microfinance loans, which have resulted in under-provisioning and non-recognition of NPAs aggregating ₹1,885 crore,” chairman Sunil Mehta said in a post-earnings call.

Anil Rao, member of the committee of executives that oversees the bank’s daily operations, said the lender reversed microfinance revenue of ₹423 crore for the accounting error identified by the internal audit team during the review of the microfinance business.

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Separately, the bank recognised materially high slippages in the microfinance business of ₹3,509 crore in the March quarter, leading to interest income reversal of ₹178 crore, Rao said.

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Rao also said the bank reversed other income by ₹1,960 crore on account of derivative-related discrepancies disclosed on March 10, 2025.”If we did not have these one-offs, we would have been at a net interest margin of 3.47% and a pre-provision operating profit of ₹3,062 crore,” Rao said. In the March quarter, net interest margin, or core profitability from operations, fell to 2.25% from 4.26% a year ago and 3.93% a quarter ago.

Net interest income – the difference between interest earned from loans and paid to depositors – fell to ₹3,048 crore in the March quarter from ₹5,376 crore a year ago, while other income plunged 72% to ₹709 crore.

Total loans stood at ₹3.45 lakh crore, up 1% YoY at the end of March, while deposits rose 7% to ₹4.11 lakh crore.