Global Rating agency Moody’s on Wednesday said it was reviewing IndusInd Bank’s risk management capabilities, and its leadership transition, with the private sector lender grappling with accounting lapses pertaining to its derivatives transactions.
“The financial impact of the derivatives losses is quite manageable considering IndusInd Bank’s strong capital.
"But it is really the risk management capabilities of the bank which we are watching out for in terms of the review,” remarked Alka Anbarasu, associate managing director at Moody’s Ratings.
In a recent filing with stock exchanges, IndusInd Bank had said that it had received the report from the external agency which identified discrepancies relating to derivatives deals.
The report had quantified the negative impact of these transactions at Rs 1,979 crore as of June 30, 2024.
In March 2025, Moody’s placed baseline credit assessment (BCA) on review for downgrade in the backdrop of the bank’s revelations about the inadequate internal controls in accounting for derivatives transactions.
The outlook on IndusInd’s long-term ratings remains stable. At present, the rating is “Ba1” for long-term (LT) foreign currency (FC) and local currency (LC) bank deposits.
Referring to another private lender Yes Bank, Anbarasu of Moody’s said that although the bank has cleaned up its books, its profitability remains low compared to its counterparts.
The profitability will be monitorable as it was linked to the bank’s ability to raise external capital.
The Return On Assets (RoA) for Yes Bank was around 70 basis points, while the RoAs of comparable private banks were more than 1.5 per cent.
Yes Bank has been rehabilitated after the default that took place a few years ago, with new shareholders coming in.
In July 2024, Moody’s had revised its outlook on Yes Bank from ‘stable’ to ‘positive’ on the expectation of a gradual improvement in its depositor base and lending franchise.
Moody’s outlook for India’s banking system remains stable, driven by government capital expenditure, tax cuts, and monetary easing, which may boost consumption.
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