IndusInd Bank Faces Governance Crisis: Analysts Warn of Deepening Confidence Issues

IndusInd Bank is grappling with a major crisis of confidence, as concerns around internal governance, accounting lapses, and ongoing financial discrepancies shake investor sentiment. While the bank maintains that a clean-up is already underway and all known issues have been addressed, analysts remain cautious about the lender’s future.

Major Blow from March Quarter Results

The trigger was IndusInd Bank’s March quarter results, which revealed a massive loss-before-tax of around ₹30,000 crore. This steep fall was primarily due to reversals and provisions related to accounting discrepancies in its microfinance portfolio and derivative transactions.

What began as a derivatives income overstatement two months ago has now spiraled into a full-blown governance crisis, significantly damaging the bank’s credibility in the market.

Brokerages Slash Ratings, Highlight Profitability Risks

Following the results, several leading brokerage firms downgraded their stance on IndusInd Bank. IIFL Capital, HSBC, and Nuvama all reduced the stock to a ‘Reduce’ rating, pointing to blurred profitability visibility and a prolonged path toward recovery.

Analysts believe that even a 1% return on assets seems like a distant reality for IndusInd Bank.

IIFL pegged the total profit and loss impact of misclassifications and frauds at ₹4,700 crore, which is about 7% of the bank’s net worth as of Q3FY25. The brokerage also expressed serious concerns over whether all irregularities have truly surfaced.

Governance and Leadership Challenges

Adding to investor concerns is the uncertainty around leadership. The bank’s CEO has stepped down, and the board is now in the process of appointing a new one. The shortlist for the new CEO is expected to be submitted to the RBI by June 30.

While IndusInd Bank insists that auditors have thoroughly combed through the books and all known issues have been accounted for, brokerages like Equirus point to fresh irregularities—such as misrecognised fee income discovered just a day before the results—as signs that “skeletons may still remain in the closet.”

Mixed Market Sentiment

Among the few outliers, Macquarie maintained an ‘Outperform’ rating, arguing that the bank is currently trading at a steep discount compared to its private sector peers. On a trailing basis, IndusInd trades at just 5x annualised pre-provisioning operating profit and 0.9x FY25 price-to-book, making it cheaper than most competitors.

However, even Macquarie admits that the clean-up’s completeness is uncertain, and critical metrics like management clarity, credit cost trends, and net interest margin (NIM) stability need close monitoring before any positive re-rating can occur.

On the flip side, Jefferies, while keeping a ‘Buy’ rating, stated that the clean-up was more extensive than anticipated and noted that the bank’s exit business run-rate is now at a very low base.

Road Ahead Looks Rocky

Looking forward, most analysts have toned down their growth and profitability projections. Brokerages like Equirus and Nuvama expect IndusInd Bank’s return on assets to stay below 1% through FY27. Weak fee income and higher funding costs—due to a weakened deposit base—are likely to hurt net interest margins.

Only a structural leadership shift and long-term strategy reboot can bring stability back to IndusInd Bank, say analysts.

Despite reassurances from the bank, market sentiment remains subdued, and investor confidence is yet to return. The next few quarters will be critical as the bank navigates leadership transition, executes its governance overhaul, and attempts to rebuild trust in the market.