In May 2025, IndusInd Bank disclosed a suspected case of internal fraud involving its microfinance operations, with ₹172.58 crore wrongly recorded as fee income across three quarters in the financial year 2024–25.

The irregularity came to light following investigations by an external professional firm and the bank’s Internal Audit Department (IAD). However, the IndusInd Bank is making efforts to recover from the financial mess caused by past frauds, its chairman Sunil Mehta has said.

Therefore, the bank is ramping up retail liabilities, scaling secured retail and MSME assets, and being more selective in the corporate lending space, all key focus areas for the current fiscal year.

Why IndusInd Bank Needs to Focus on Building Deposits, Scaling Secured Retail and MSME Assets?

The Hinduja family-promoted bank is currently dealing with a slew of issues stemming from alleged irregularities in recognising bad loans and booking trading reverses.

For the March quarter of FY25, IndusInd Bank reported a consolidated net loss of ₹2,329 crore. As per media reports, by June 2025, the bank had already incurred ₹2,600 crore in accounting losses.

Chairman Sunil Mehta described FY25 as a “watershed year” for the bank, remarking:

“This was also a year of internal reckoning. We faced certain challenges that required swift, transparent and decisive actions by the board and management. These events, while unfortunate, have catalysed a major transformation rooted in ethics, accountability, transparency and long-term sustainability.”

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IndusInd Bank’s Major Financial Setbacks (FY25)

Issue	Amount (₹ crore)	Description
Derivative portfolio lapse	1,979	Misstatement in derivative trading book
Misreported microfinance interest	674	Incorrectly recorded as interest income
Unsubstantiated balances in “other assets”	595	Unexplained entries in balance sheet
Misreported fee income (microfinance)	172.58	Recorded across three quarters without basis
Total impact	3,420+	Significant erosion of reported earnings

These setbacks highlight governance gaps and the urgency for corrective action, especially in risk management and audit processes.

How Does the Balance Sheet of IndusInd Bank Look?

Despite the accounting shocks, the bank insists that its balance sheet remains robust, supported by:

Healthy capital adequacy ratio
Strong provision coverage
Comfortable liquidity levels

According to Mehta, these fundamentals give the bank a strong foundation for future growth.

IndusInd Bank’s FY26 Strategic Focus Areas:

Strategic Priority	Objective	Rationale
Ramp up retail liabilities	Grow deposit base	Reduce funding cost and dependency on wholesale borrowings
Scale secured retail lending	Increase home loans, vehicle loans	Lower default risk and improve asset quality
Expand MSME assets	Provide credit to small businesses	Higher yields and diversification
Selective corporate lending	Focus on high-quality clients	Avoid large-ticket, high-risk exposures
One Bank approach	Cross-sell and unify operations	Improve efficiency and customer experience

Who is the New MD and CEO of IndusInd Bank?

Earlier this month, IndusInd Bank announced the appointment of Rajiv Anand, former Deputy Managing Director of Axis Bank, as its new Managing Director and CEO after receiving the Reserve Bank of India’s (RBI) approval.

His appointment will be effective from 25 August 2025 to 24 August 2028, subject to shareholder approval. Anand brings over three decades of banking experience, with deep expertise in retail, corporate, and treasury operations skills that will be critical in steering IndusInd Bank through its current recovery phase.

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What Are Retail Deposits?

From a banking perspective, retail deposits refer to funds placed in the bank by individual customers rather than institutions. This includes savings accounts, current accounts, recurring deposits, and fixed deposits from the general public. These deposits are typically stable, low-cost, and form the backbone of a bank’s funding base.

Think of retail deposits as the regular grocery shopping a household does every week. It may not be flashy, but it’s dependable, consistent, and keeps the kitchen stocked much like how retail deposits provide steady liquidity to a bank.

What Are Secured Retail Assets?

Secured retail assets are loans given to individual borrowers where the bank holds collateral (such as a house, car, or gold) to secure the repayment. Common examples include home loans, vehicle loans, and loans against property.

The “secured” nature means the bank has the right to seize and sell the collateral if the borrower defaults, reducing the risk of loss.

It’s like lending your expensive camera to a friend only after they leave you their laptop as a security deposit if they don’t return the camera, you still have something of value to cover your loss.

What Are Secured MSME Assets?

Secured MSME (Micro, Small and Medium Enterprises) assets are loans provided to small and medium-sized businesses, backed by collateral such as business premises, machinery, inventory, or other fixed assets.

These loans help MSMEs fund working capital needs, buy equipment, or expand operations while giving the bank protection against defaults.

Imagine a tailor taking a loan to buy a high-end sewing machine but giving the machine itself as collateral. If the tailor can’t repay, the lender can reclaim the machine to recover some or all of the loan amount.

Conclusion

IndusInd Bank is emerging from a difficult year marked by financial misreporting and internal control failures. Under the leadership of its chairman Sunil Mehta and incoming MD & CEO Rajiv Anand, the bank is betting on a retail-first strategy, strengthening deposits, growing secured retail and MSME assets, and tightening risk controls in corporate lending.

While its fundamentals remain intact, restoring market confidence will depend on transparent governance, consistent earnings recovery, and successful execution of its FY26 strategic priorities.

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