Difficult time for microfinance business behind us, Q2 to see growth: IndusInd Bank MD

The difficult phase for the microfinance business is now behind us, with risks playing out favourably, and growth in the segment is expected to return from the second quarter onwards, IndusInd Bank MD and CEO Rajiv Anand has said. IndusInd Bank faced a severe governance and accounting crisis in 2025 centred around its microfinance subsidiary, Bharat Financial Inclusion Ltd (BFIL). The bank reversed `674 crore of cumulative interest income recognised incorrectly across FY25. A further `172 crore was disclosed as fraud, where employees falsely reported the sum as fee income in the microfinance business.

“We have had a fairly difficult time on our microfinance business. But it is all now behind us. Risk is playing out quite well at this point in time and Q2 onwards we should see growth come back in our microfinance businesses,” Anand said in an interview. The microfinance arm has a very successful business called Bharat Superstore, where it lends to kirana stores, small restaurants and other such businesses, he said.

“That business is also doing well and continues to perform strongly. So, the entire microfinance and rural banking business that we have should show strong growth as we move into the second quarter and beyond,” he added. “We needed to scale up our disbursements, which has now happened, and we are very confident that we should see growth from here,” he said.

Asked about growth in microfinance portfolio in FY27, Anand said, “We think that this year, our microfinance business should grow somewhere between 15-20 per cent”. On the overall asset side, he said the growth will be broadly in line with the market for the current financial year.

“Whatever the market is, I think currently the market is around 17-18 per cent. We believe we will be in that vicinity,” he said. About the impact of Expected Credit Loss (ECL) guidelines coming into force from April 1, 2027, Anand said, “We would require around 1-1.5 per cent of assets. At least, that’s our first estimate. Our net worth is more than adequate to absorb the impact”.

It would have an impact of about 1 per cent on Common Equity Tier 1 (CET1), which is about 16.1 per cent at the end of June 2026, he added.

For the first quarter ended June 30, IndusInd Bank posted a 72 per cent jump in consolidated profit after tax to Rs 1,037.05 crore against a profit of Rs 604.07 crore in the year-ago period.