IndusInd Bank Pins Recovery Hopes on Commercial Vehicle and Microfinance Portfolios
Mumbai-based IndusInd Bank is strategically focusing on its commercial vehicle (CV) and microfinance segments to reclaim lost momentum and navigate past recent challenges. The bank has faced accounting issues and a leadership transition, but under new management, it aims to align growth with the broader banking system in the coming year.
Leadership Confidence and Strategic Focus
Managing director and chief executive officer Rajiv Anand expressed optimism about the newly established leadership team. He emphasized that robust performance in the CV and microfinance businesses will be pivotal for the bank's recovery. In a post-December quarter earnings call, Anand highlighted that incremental disbursals in the microfinance book are showing improved behavior compared to recent trends.
"We are very hopeful that the microfinance business will see better growth and reduced slippages moving forward, while the commercial vehicle segment remains a steady performer," Anand stated. This dual focus is part of a broader strategy to stabilize the bank's operations and foster sustainable growth.
Quarterly Performance and Loan Book Analysis
During the quarter ended December, IndusInd Bank's overall loan book declined by 13% year-on-year and 3% quarter-on-quarter, settling at ₹3.17 trillion. A detailed breakdown reveals mixed trends across different segments:
- The retail loan book, constituting 51% of the total portfolio, fell 3% year-on-year to ₹1.61 trillion.
- Commercial vehicle loans, which account for 35% of the share, increased by 5% year-on-year to ₹98,196 crore.
- Consumer banking rose 18% year-on-year to ₹31,057 crore.
- Wholesale banking experienced a significant drop of 28% to ₹1.12 trillion.
- Microfinance institution (MFI) loans plummeted by 46% to ₹17,669 crore.
Despite the sequential decline in average advances due to reductions in micro-loans and adjustments in the wholesale book, disbursements remained strong in vehicle finance, retail, and granular corporate lending. Anand noted that growth in the micro, small, and medium enterprise (MSME) segment is expected to strengthen, which could boost fee income and enhance the liability franchise.
Improvements in Microfinance and Future Outlook
Anand pointed out that incremental disbursements in the MFI segment are now demonstrating better repayment behavior. This development raises expectations for improved growth and reduced slippages starting from the March quarter. The bank's strategy involves leveraging these positive trends to rebuild its microfinance portfolio while maintaining stability in the CV sector.
Liability Business and Deposit Trends
On the liability side, IndusInd Bank's deposits decreased by 4% year-on-year and 1% quarter-on-quarter to ₹3.93 trillion. Anand outlined the bank's intent to grow in line with the market for both assets and liabilities in the 2026-27 period. "We aim to grow our liability franchise faster than our bulk deposits by granulizing our liabilities," he explained.
This approach is expected to positively impact the cost of funds and support the development of a less risky and volatile asset side of the balance sheet. The bank's ambition is to achieve a 1% return on assets on an exit basis over the next 12 to 18 months. To strengthen the retail liability business, management is investing in organizational changes, process improvements, and enhanced branch-level productivity.
Capital Adequacy and Regulatory Clarifications
Regarding capital, Anand assured that the bank's capital adequacy remains comfortable and sufficient to support near-term growth. However, a capital raise might be considered in the future as growth accelerates. Addressing regulatory concerns, the bank clarified that the Serious Fraud Investigation Office is investigating certain past and present officials, not the bank itself. Additionally, an audit qualification at subsidiary Bharat Financial Inclusion pertains to legacy issues, with any financial impact already accounted for in previous years, and the ongoing probe focuses on staff accountability.
In summary, IndusInd Bank is charting a recovery path centered on its commercial vehicle and microfinance portfolios, backed by new leadership and strategic initiatives to improve performance across key segments.
