IndusInd Bank Reports Record Quarterly Loss Amid Suspected Employee Fraud

IndusInd Bank posted its biggest ever quarterly loss of INR 2,236 crore in Q4 FY25, a massive reversal from the profit it posted of INR 2,347 crore a year ago. The private lender stated it had indicated suspected fraud by some of its employees as well as years of accounting errors, mainly in its derivatives and micro finance portfolios.

The share price dropped by as much as 6% on Thursday, making it the biggest loser on the Nifty 50 but retraced over 3.5% largely on hopes that the worst was over. The drop was primarily due to an internal investigation that found irregular accounting related to internal derivative trades which led to the company absorbing an INR 1,966 crore hit. Additionally, INR 684 crore was incorrectly classified as interest income, and there were also other long shortfalls, including INR 595 crore in unverified balances and wrong loan classifications where provisions were not made for INR 1,880 crore.

Brokerages responded immediately, with at least six downgrading the stock and 13 cutting price targets. HSBC has downgraded its rating two levels from ‘buy’ to ‘reduce’, citing a lack of clarity on management and a lapse in governance. Nuvama has reduced its target to INR 600 and stated it may take years for the trust of investors and depositors to be rebuilt.

The departure of chief executive officer Sumant Kathpalia and deputy CEO Arun Khurana last month has increased uncertainty. The bank is set to propose new leadership to the RBI by June 30.

While analysts believe that recovery may take 3-4 years, IndusInd’s size and market strength may bring recovery forward if there are improvements in governance and transparency.