IndusInd Bank has a history of repeated accidents regarding asset quality. The last case was of irregularities in accounting in 2025. Due to this the senior leadership of the bank had to leave. Now the command of the bank is in the hands of Rajiv Anand. He is forming a new team. Challenges regarding asset quality of micro-finance are decreasing. The question is whether it would be right to invest in IndusInd Bank shares for the long term?
Bank is being cautious in MFI portfolio
IndusInd Bank Instead of growth, headline advances have shown a decline of 8.8 percent. However, in view of the recent crisis, quarter-by-quarter data will have to be looked at. There has been a de-growth of 2.3 percent. The main reason for this is the decline in micro-finance portfolio (MFI). The bank is being cautious regarding the MFI segment. He has increased focus on income assessment. Extra care is being taken in the verification of Voter ID. More discipline is being maintained than the regulatory norms.
Good growth expected in vehicle finance in the second half
IndusInd Bank expects the growth of vehicle finance portfolio to increase in the second half of this financial year. Reduction in GST rates will contribute to this. Vehicles and MFIs will remain the engines of bank’s growth. Also, the bank wants to increase the growth of MSME corporate loans with focus on mid and small. There is huge growth potential in traditional retail asset businesses like home loans, LAP and gold loans.
Bank is facing struggle in CASA case
Deposits have declined by 5.5 percent on year-on-year basis and 1.9 percent on quarter-on-quarter basis. The bank deliberately wants to reduce wholesale deposits. In the September quarter, Certificates of Deposits (CD) declined by 1.2 percent on quarter-on-quarter basis. However, retail deposits have remained stable. The share of retail deposits in total deposits remains 47 percent. However, the bank is struggling in terms of ‘Current Account and Savings Account’ (CASA). It has shown a de-growth of 4.2 percent on a quarter-on-quarter basis. Its share in total deposits has also decreased.
IndusInd Bank made loss in the second quarter
The credit and deposit ratio of IndusInd Bank remains at 84 percent. The bank fell into loss in the second quarter of this financial year. The reason for this is more provisioning for the MFI portfolio. If MFIs are excluded, the slippage was only 36 basis points. This is slightly less than the June quarter. The Bank has taken credit guarantee cover on the standard portfolio. Despite American tariffs, there has been no pressure in the gems and jewelery segment so far.
What should you do?
The new management of the bank is trying to build a strong business with a diversified de-risked asset book. The bank has set a target of 1 percent RoA in the medium term. The company’s headline valuation is one times FY27 estimated book. It is not cheap considering the RoA is less than 1 percent. But, there is hope of improvement in the bank’s business. Its RoA will increase gradually. In such a situation, investors can continue investing in this stock.