IndusInd Bank, one of India’s leading private lenders, has reported a record quarterly loss of ₹2,329 crore in Q4FY25, following revelations of suspected fraud involving key employees. The bank’s stock witnessed a sharp decline as investors reacted to the financial discrepancies and governance concerns.
The bank’s Board of Directors disclosed that certain employees, including former Key Management Personnel (KMP), were allegedly involved in overriding internal controls and concealing wrongful accounting practices. Investigations by external agencies revealed that ₹1,960 crore in notional profits had been incorrectly booked since FY16 and were subsequently written off in FY25. Additionally, ₹423 crore in cumulative interest from the bank’s microfinance loan portfolio was found to be incorrectly recorded.
In response to the findings, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from their positions. The Reserve Bank of India (RBI) has directed the bank to submit candidate names for the CEO position by the end of June. The bank’s chairman, Sunil Mehta, assured stakeholders that despite the setbacks, IndusInd Bank maintains a robust net worth and balance sheet and is committed to reinforcing its governance and compliance culture.
Following the announcement, IndusInd Bank’s net interest income fell 43% year-on-year to ₹3,048 crore, while other income dropped 72% to ₹709 crore. The bank’s net interest margin (NIM) declined sharply to 2.25% from 3.93% in the previous quarter. Additionally, provisions and contingencies surged over twofold to ₹2,522 crore, while fresh slippages rose to ₹5,014 crore, primarily driven by bad loans in the microfinance sector.
Stock analysts have expressed concerns over the long-term impact of the fraud allegations on retail deposits and liquidity. Some brokerages have cut their FY26 earnings estimates by up to 45%, citing uncertainty surrounding the bank’s recovery process. Historically, banks facing similar financial discrepancies have taken three to four years to stabilize, raising questions about IndusInd Bank’s ability to regain investor confidence.
Despite the turmoil, the bank’s leadership remains optimistic, stating that FY26 will begin with a clean slate and that lessons from the crisis will be integrated into future governance policies. The bank is expected to maintain high liquidity buffers in the coming quarters to manage potential deposit outflows.
