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Troubled IndusInd Bank shows 72 percent fall in profit in Q1FY26

The bank, which has seen a string of C-suite exits following accounting irregularities by employees, also recorded a drop in income and weaker NPAs during the period

By Salil Panchal Forbes India Staff

Published: Jul 29, 2025 09:45:40 AM IST

Updated: Jul 29, 2025 09:46:36 AM IST

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Photo by Niharika Kulkarni/NurPhoto via Getty Images

Troubled private sector lender IndusInd Bank—India’s fifth largest private lender by assets—on Monday reported a 72 percent drop in consolidated net profit for the three months to June 2025, with asset quality and income levels also showing stress for the quarter.

The earnings come weeks before the Reserve Bank of India (RBI) is to finalise a new successor for IndusInd Bank, which is facing a trust deficit due to a string of accounting irregularities involving its employees in previous years. This had led to the hasty exits of the Bank’s former MD & CEO Sumant Kathpalia and deputy CFO Arun Khurana.

Last week its chief human resources officer Zubin Mody quit after a 20-year tenure, citing “new opportunities outside”. A committee of executives runs the bank from July 29 to August 28 or until the new managing director and CEO are appointed and assume charge, whichever is earlier, IndusInd Bank informed the exchanges last week.

Net profit for IndusInd Bank fell to Rs 604.05 crore for Q1FY25 from Rs 2,170.7 crore for the corresponding quarter in the previous year. Net interest income has fallen to Rs 4,640 crore in Q1FY26 compared to Rs 5,408 crore a year earlier. Asset quality has also fallen, with gross NPA (as a percentage of total advances) rising to 3.64 percent from 2.02 percent in the same period.

IndusInd Bank’s net interest margin fell 79 basis points (bps) to 3.64 percent in the June-ended quarter from 4.25 percent a year earlier. One basis point is equal to one-hundredth of one percent.

In May, IndusInd Bank’s Chairman Sunil Mehta, in an analysts call, said he suspected some bank employees to be involved in the accounting irregularities and has reported these matters to the regulators and investigative agencies.

The market regulator Securities and Exchange Board of India, in a 32-page long interim order issued in June, banned five senior executives of the bank from trading in securities on charges of alleged insider trading based on investigation. The banned officials include Kathpalia, Khurana, alongside the head of treasury operations Sushant Sourav, head of global markets operations Rohan Jatana, and the chief administrative officer of consumer banking operations Anil Maru Rao.

A final order from Sebi is awaited.

In the March quarter, IndusInd Bank suffered from a quarterly loss—its first and highest ever in nearly 20 years—besides lower income and weak asset quality.

IndusInd Bank stock has seen an erosion of 43 percent in value in the last year, to Rs 799 from Rs 1,411 a year earlier at the BSE.

Loan growth was largely sluggish, gaining 5.5 percent to Rs 2,01,273 crore for Q1FY26, from Rs 1,90,625 crore. The bank has ensured the exposure towards micro loans has reduced to 8 percent (of the loan book) from 11 percent a year earlier for the corresponding quarter.

“Every other bank that has gone through accounting discrepancies or prior-period adjustments has taken 3–4 years to achieve a new normal,” Mahrukh Adajania, analyst, Nuvama Institutional Equities, had said in a note to clients, prior to the announcement of the Q1FY26 earnings.

In previous years, IndusInd Bank had been hit hard, both during the pandemic and due to aggressive lending to IL&FS, much of it leading to increasing bad loans. Gross slippages rose to 3.7 percent between FY20-22.

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