IndusInd Bank is facing potential stress from microfinance institutions (MFIs), with a gross non-performing assets (GNPA) of 6.5 per cent and 30-90 days past due (DPD) of 4 per cent in Q2-FY25. The bank may need to increase provisions to cover for this potential stress, leading to a decrease in core profits.
To address this issue, IndusInd Bank is focusing on diversifying its loan portfolio away from MFIs towards vehicle loans and expanding into merchant and MSME/home improvement loans. This shift in focus aims to reduce MFI exposure and stabilize credit costs for the bank.
Despite near-term challenges, the medium-term outlook for IndusInd Bank remains positive, with a projected core Return on Assets (RoA) of 1.4-1.5 per cent in FY26/27E. A potential positive trigger could be the extension of the MD & CEO’s term by the RBI.
In light of these developments, analysts have revised their target price for IndusInd Bank to ₹1,500 from ₹1,600, while maintaining a Buy rating. Investors should monitor the bank’s progress in addressing MFI stress and diversifying its loan portfolio to assess its long-term growth prospects.
