TL;DR
IndusInd Bank’s Q4 FY25 results weren’t just bad — they were bizarre. Derivative losses, misclassified microfinance loans, fake income, resignations at the top, and opaque reclassifications filled a results package that sounded more like a forensic audit than a financial disclosure.
Despite management assurances that everything is clean, many more surprises may still be lurking.
What has been disclosed so far
Here are the biggest issues disclosed by the management so far:
1. Derivative Trading Loss: ₹1,960 Cr ($229.30 million)
There was a massive one off due to improper internal FX derivative accounting between the bank's own desks. It was not hedged properly and was not reported to the board earlier. The practise was discountinued from April 2024, but the impact is showing up only now.
This loss alone is 26% of the bank’s FY25 operating profit before the issue.
2. Microfinance Time Bomb: ₹3,509 Cr Slippages
1,885 crore rupees of microfinance loans should have been classified as NPAs but were misclassified as non-NPA. This meant that the revenue for those loans kept getting added, leading to inflated interest and fee income. This misclassification was caught during a Q4 review, even though it had been happening for over 9 months.
Over 50% of the bank’s Q4 slippages came from just one segment.
3. “Other Assets” and “Other Liabilities”: The Phantom ₹595 Cr
There are 595 crores of other assets and liabilities that were netted off without a P&L impact. The management gave no breakdown of what these balances were, how they go there or how long were they sitting there undisclosed.
4. Fake Interest Income: ₹760 Cr
760 crore of revenue that should have been Fee income was classified as interest income. Management could not fully explain what this reclassified amount was — only promised an offline explanation.
5. Other P&L Games
The call and notes to accounts reference multiple other adjustments:
- ₹423 Cr reversal from revenue (microfinance fee + interest error)
- ₹178 Cr interest income reversal due to microfinance NPA recognition
- ₹158 Cr moved from provisions to opex
Despite all this, management insists these were “just regroupings.” No explanation on whether these involved backdated accruals or incorrect reporting in prior quarters.
6. No formal fraud announcements or FIR
It is inclear if there was any internal fraud. No FIR has been filed yet, nor has any formal fraud announcement has been done so far. It has however been reported to regulators and investigative agencies.
There is also no clarity on clawbacks or legal action.
7. Liquidity Flood
The average LCR (Liquidity coverage ratio) spiked to 139% in April-May. The end of quarter surplus liquidity hit Rs 62,000 crores. Some of it came from letting corporate loans shrink by Rs 27,000 crores in a single quarter - which could be a tactical move to stay liquid.
Yield drop across books Corporate yield dropped to 8.07% from 8.80%, with no full explanation
Summarising
The Management Says that they are starting with a clean slate, but frankly there are multiple disclosures needed before we can get there.
We can still expect more changes after the audits are completed. RBI could also enforce actions.
This isn’t just a bad quarter — this is a structural credibility crisis. When accounting, internal controls, P&L reporting, and executive leadership all unravel in one go, recovery takes more than earnings normalization.