IndusInd Bank Limited — Q3 FY26 earnings call

Call held 23 Jan 2026

Management summary

IndusInd Bank reported a mixed Q3 FY26, with pre-provision operating profit growing 11% QoQ to Rs.2,270 crores, but profit after tax remained low at Rs.128 crores due to high provisions. The bank continued balance sheet optimization, leading to a 2% QoQ de-growth in the average loan book, primarily from micro loans and wholesale banking. Retail deposit share improved to 47.5%, and asset quality indicators like SMA 1 and SMA2 showed improvement, though micro loan slippages remained elevated.

Highlights

  • Pre-provision operating profit at Rs.2,270 crores, grew 11% QoQ, supported by improved net revenues and disciplined cost management.

  • Normalized NIM improved to 3.35% from 3.32% QoQ, reflecting better cost of funds and liquidity optimization.

  • Vehicle disbursements increased 26% QoQ to Rs.12,900 crores, leading to 2% QoQ growth in the vehicle finance loan book.

  • Home loan book showed strong momentum, growing 94% YoY and 10% QoQ to Rs.6,114 crores.

  • Share of retail deposits inched up to 47.5% from 47% QoQ, with average deposits de-growing by only 1% due to bulk reduction.

Concerns

  • Profit after tax for the quarter was low at Rs.128 crores.

  • Provisions remained high at Rs.2,096 crores, given elevated flows in micro loans and write-off of accumulated NPAs.

  • Average loan book de-grew by 2% QoQ, driven by continued run-down in micro loans and risk-reward driven calibration in corporates.

  • Micro loan book de-grew 17% QoQ to Rs.17,669 crores, and slippages in micro loans remained elevated.

  • Credit cards loan book de-grew 6% YoY due to rationalization of inefficient spends.

Key financials

  1. Pre-provision operating profit ₹2,270 Cr +11%QoQ
  2. Profit After Tax ₹128 Cr
  3. Net Interest Income ₹4,562 Cr
  4. Normalized NIM 3.4% +0.09%QoQ
  5. Core Fee Income ₹1,575 Cr +2%QoQ
  6. Operating Expense ₹3,999 Cr
  7. Provisions & Contingencies ₹2,096 Cr
  8. GNPA 3.6%
  9. NNPA 1%
  10. Overall PCR 72%
  11. CET 1 Ratio 15.7%
  12. CRAR 16.9%
  13. Average Advances Growth -2% -2%QoQ
  14. Average Deposits Growth -1% -1%QoQ
  15. Retail Deposits Share 47.5%
  16. Cost of Deposit 6.1%
  17. Vehicle Disbursements ₹12,900 Cr +26%QoQ
  18. Vehicle Finance Loan Book ₹98,196 Cr +2%QoQ
  19. Micro Loan Book ₹17,669 Cr -17%QoQ
  20. Home Loan Book ₹6,114 Cr +94%YoY
  21. Overall Consumer Banking Assets ₹31,057 Cr +18%YoY
  22. SME Portfolio ₹43,957 Cr
  23. Wholesale Banking Loans Growth -5% -5%QoQ
  24. SMA 1 and SMA2 Book 17 bps
  25. 31-90 Days Past Due (Micro Loans) 2.4%

What they filed

Q1 FY27: revenue down 7.8%, net profit up 46.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue12,686 12,801 10,634 12,264 11,609 −8%11,373 −11%11,005 +3%11,310 −8%
Net profit1,325 1,401 -2,236 684 -445 −134%161 −89%533 +124%1,002 +46%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Healthy liquidity position with an average LCR of 122% and average surplus liquidity of Rs.43,000 crores. Capital adequacy remains healthy with CET 1 ratio at 15.74% and CRAR at 16.94%.
    We maintained healthy liquidity position during the quarter with an average LCR of 122% and average surplus liquidity of Rs.43,000 crores. The capital adequacy remains healthy with CET 1 ratio at 15.74% and CRAR at 16.94%.

Guidance & targets

Loan Growth

  • Overall Loan Growth Loan Growth · FY26-27 · High confidence in line with market
    our intent is to grow in line with market in the financial year 2026-2027

    — Rajiv Anand

Profitability

  • ROA Profitability · back end of FY27 · High confidence in the vicinity of 1%
    and be in the vicinity of 1% ROA as we get to the back end of that year.

    — Rajiv Anand

Market Share

  • Vehicle Finance Market Share Market Share · going forward · Medium confidence 9%
    Our intent is to take that back to 9% as we go forward.

    — Rajiv Anand

  • Microfinance Market Share Market Share · going forward · Medium confidence gain market share
    we will continue to gain market share on our microfinance business.

    — Rajiv Anand

  • SME Market Share Market Share · short to medium term · Medium confidence gain market share
    we will be able to gain market share [in SME].

    — Rajiv Anand

Capital Allocation

  • Capital Raise Capital Allocation · next 12-18 months · High confidence not required
    growth capital is not something that we require. And even if we do consume at a relatively lower ROA, I think we have more than sufficient, at least for the next 12-18 months.

    — Rajiv Anand

Asset Quality

  • ECL Impact (pre-tax) Asset Quality · future (when implemented) · Medium confidence 1.5%-1.7% of loan book
    our initial assessment suggests a pre-tax impact between 1.5%-1.7% of the loan book.

    — Viral Damania

  • Net NPA Asset Quality · over a period of time · High confidence well below 1% (60-70 bps)
    Our intent is to bring down Net NPA well below 1%, in the 60-70 basis points vicinity over a period of time.

    — Rajiv Anand

  • Vehicle Finance Slippage Asset Quality · current year (FY26) · High confidence 20 bps lower
    We are expecting 20 basis point lowering of slippage during this current year.

    — AG Sriram

What to watch in Q4 FY26

Micro Loan Book Growth

Next quarter (Q4 FY26 results)
Current de-grew 17% QoQ to Rs.17,669 crores
Target Growth after Q4 FY26

Why it matters

Key for overall loan growth and meeting PSL requirements, as management expects growth post-Q4.

Our micro loan disbursements were at Rs.3,598 crores. However, given the contractual rundowns of around Rs.6,300 crores during the quarter, our micro loan book de-grew 17% QoQ to Rs.17,669 crores... Having said that, there has been a significant increase in disbursals in this quarter, really from the middle of October. And so, therefore, to that extent, the full benefit of disbursals will come through in Quarter 4, when monthly disbursals will be higher than the repayments that we receive and the book will start to grow after Q4 onwards.

Risks & concerns

  • RBI Regulatory Actions

    high

    Analyst inquired about the RBI annual supervisory outcome and its potential impact, but management stated discussions are confidential.

    Analyst not addressed

  • Elevated Micro Loan Slippages

    medium

    Slippages in micro loans remained elevated as last quarter, though stringent underwriting norms are showing effect.

    Management acknowledged

  • High Provisions

    medium

    Provisions remained high given elevated flows in micro loans and write-off of accumulated NPAs.

    Management acknowledged

  • Potential Impact of ECL Implementation

    medium

    Initial assessment suggests a pre-tax impact between 1.5%-1.7% of the loan book from ECL.

    Management acknowledged

  • Uncertain Global Macro Environment

    low

    Global environment remains uncertain with shifting trade policies and possible multi-polar world order.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Net NPA Target and Provisioning Strategy Direct
Our intent is to bring down Net NPA well below 1%, in the 60-70 basis points vicinity over a period of time.

Analyst questioned the slow progress on Net NPA reduction; management provided a specific long-term target and explained the provisioning strategy.

Asked by Kunal Shah

Overall Loan Growth Acceleration Timeline Direct
our intent is to grow in line with market in the financial year 2026-2027 and be in the vicinity of 1% ROA as we get to the back end of that year.

Analyst sought clarity on when overall loan growth would pick up, and management reiterated its FY26-27 target and linked it to ROA.

Asked by Kunal Shah

Microfinance SMA-1 and SMA-2 Numbers Direct
We have mentioned in the opening remark, the SMA-1 and 2 or 30 to 90 DPD is 2.4% against 3.2% last quarter.

Analyst requested specific early stress indicators for microfinance, which management provided, showing an improvement.

Asked by Jay Mundhra

Role of MFI in PACE Strategy Direct
I believe... that the microfinance business is a very critical business for this Bank and for multiple reasons. It is a business that if run well is a very profitable one... this is going to meet our critical PSL requirements makes this a very important business for us.

Analyst questioned MFI's strategic role given its cyclical nature; management affirmed its importance for profitability and PSL, outlining plans for CGMFU cover.

Asked by Jay Mundhra

Medium-Term ROA Aspiration and Levers Partial
I think there is opportunities for us to improve pretty much on each of these lines. On the NIMs through some benefits on cost of funds, fee incomes both on retail and corporate, some cost takeouts and be able to reduce credit costs as we go forward.

Analyst pressed for a longer-term ROA target and its drivers; management outlined multiple levers but deferred a specific number beyond FY27.

Asked by Rikin Shah

Vehicle Finance Slippage Reasons and Outlook Direct
Slippage will be better than the last year. The slippage will be like both on absolute terms and on percentage terms lower than last year. We are expecting 20 basis point lowering of slippage during this current year.

Analyst inquired about high vehicle finance slippages; management provided an outlook for improvement and attributed past issues to GST changes.

Asked by Chintan

Impact of Policy Changes on Slippages Direct
slippages are not policy-driven, right? That basically IRAC norms and normal identification of NPA. So that is not policy-driven. What is driven by policy is at what point do you write off and what is the quantum of provisioning that you need to do?

Analyst asked about policy changes affecting slippages; management clarified that policy changes relate to write-off and provisioning, not slippage identification itself.

Asked by Chintan

RBI Annual Supervisory Outcome Evasive
The RBI discussions with the Bank are confidential in nature. We won't be in a position to comment on it till the discussions are conclusive. As and when required, we will make the required announcements or disclosures.

Analyst asked about a potential regulatory risk; management declined to comment due to confidentiality, indicating an ongoing sensitive matter.

Asked by Ankit Bihani

3 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

IndusInd Bank reported a pre-provision operating profit of Rs.2,270 crores, marking an 11% QoQ growth. However, the profit after tax for the quarter stood at a lower Rs.128 crores, primarily due to high provisions of Rs.2,096 crores. Net Interest Income (NII) was Rs.4,562 crores, with the normalized Net Interest Margin (NIM) improving to 3.35% from 3.32% QoQ. Core fee income grew 2% QoQ to Rs.1,575 crores, contributing to an overall non-interest income growth of 3% QoQ to Rs.1,707 crores.

Balance Sheet Optimization and Deposit Franchise Strength

The bank continued its strategy of right-sizing the balance sheet by shedding inefficient assets and liabilities. Average deposits de-grew by 1% QoQ, driven entirely by a reduction in bulk deposits, while average retail deposits remained stable QoQ and grew modestly on a period-end basis. Consequently, the share of retail deposits increased to 47.5% from 47% QoQ. The cost of deposits improved by 14 bps QoQ to 6.09%, mainly due to term deposit repricing. Borrowings were also reduced by 13% QoQ, and the bank maintained a healthy average LCR of 122% with Rs.43,000 crores of surplus liquidity.

Asset Quality and Micro Loan Portfolio Management

The bank's asset quality metrics showed a GNPA of 3.56% and an NNPA of 1.04%, with an overall Provision Coverage Ratio (PCR) maintained at 72%. Slippages, excluding micro loans, remained range-bound. However, slippages in micro loans remained elevated, though stringent underwriting norms implemented earlier in the year are beginning to show effect, with incremental stress formation reducing consistently. The 31-90 Days Past Due (DPD) book for micro loans improved to 2.4% from 3.2% in September 2025. Despite micro loan disbursements of Rs.3,598 crores, the micro loan book de-grew 17% QoQ to Rs.17,669 crores due to contractual rundowns of approximately Rs.6,300 crores.

Vehicle Finance and Consumer Banking Performance

The vehicle finance business experienced robust momentum, with disbursements increasing 26% QoQ to Rs.12,900 crores, leading to a 2% QoQ growth in the vehicle finance loan book to Rs.98,196 crores. The home loan book demonstrated strong growth, increasing 94% YoY and 10% QoQ to Rs.6,114 crores. Overall consumer banking assets grew 18% YoY to Rs.31,057 crores. Personal loans grew 12% YoY to Rs.10,598 crores, while the credit cards loan book de-grew 6% YoY due to rationalization of less efficient spends, though retail spends grew 5% QoQ.

SME and Wholesale Banking Strategy

The bank views the SME segment as a significant growth opportunity, with its current portfolio standing at Rs.43,957 crores. In wholesale banking, the loan book de-grew by 5% QoQ as the bank rationalized exposures that did not offer meaningful risk-adjusted returns. The wholesale banking portfolio maintains healthy asset quality, with 82% of customers rated A and above. Management is focused on continued granularization of the wholesale franchise and expanding growth frontiers.

Strategic Outlook and Leadership Strengthening

IndusInd Bank is pursuing a 3-year strategy anchored around P.A.C.E. (Protect endowments, Accelerate key priorities, Customer centricity, Execution excellence). Key priorities include building a more granular, lower-cost deposit base, scaling SME and mid-market businesses, and improving stakeholder perceptions. The bank has significantly strengthened its leadership team with new hires for Head of Wholesale Banking, Chief Human Resources Officer, Chief Data Officer, CEO for BFIL, Head for SME business, and Head, Digital. Mr. Arijit Basu has also been appointed as the new Chairman.

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