IndusInd Bank faces an uphill task as it searches for a new chief executive to resurrect its financials, stung by accounting discrepancies, frauds involving employees and loss in investor trust.

India’s fifth-largest bank may face muted financials in the medium to near-term and downside in share value, brokerages said after the beleaguered lender reported its biggest net loss in 20 years. 

IndusInd Bank posted a net loss of Rs 2,329 crore in the fiscal-fourth quarter ended March 2025, making it its worst quarter in financial performance and image loss. There were reports of accounting fraud in derivatives, microfinance and other assets and liabilities.

"We believe these developments could hurt the bank's business and financials in the near-to-medium term," brokerage firm Emkay said in its note.

The bank needs to fix multiple areas, starting from deviation in lending and collection practices, impairment recognition norms and also significantly improve its financial reporting practices.

“With the retail deposit mix at sub-optimal levels, a tendency to operate in high-risk segments, changes in loan mix, higher opex intensity, elevated stress in the unsecured book, and the impending change in senior leadership, the bank is faced with multiple challenges in the medium-term,” said HDFC Securities in a report.

Nirmal Bang has cut the bank's earnings estimates by 23.6% in current fiscal and 13% for FY27.

Lapses in derivatives accounting, slippages in microfinance portfolio and fraud in balance sheet disclosures have rattled the private sector bank in the March quarter, news agency PTI reported. The bank's internal audit review has found "involvement of senior bank officials, including former key management personnel (KMP), in overriding key internal controls".

The bank has reported likely involvement of the senior management in the accounting fraud to the central government.

IndusInd Bank board is expected to submit names to the RBI for a new MD by 30 June.

"We believe that given the series and intensity of frauds, the RBI may possibly consider appointing a nominee director on the Board and even push for a PSB banker as the MD, as has been seen in other beleaguered banks. Even in the event of a private banker being onboarded, as the new MD they will be faced with the uphill task of resurrecting the bank and regaining customer/investor trust," Emkay said.

Nuvama Institutional Equities in its note said the new CEO will have to tighten internal controls, strengthen governance and likely rebalance the asset mix, implying a sharp slowdown in earnings growth for next two years.

"Every other bank that has gone through accounting discrepancies or prior-period adjustments has taken 3-4 years to achieve a new normal. IndusInd, being a large bank, could take less time. Also, how retail depositors behave in the short term after back-to-back disclosures of prior-period adjustments is unknown," Nuvama said.

The bank has witnessed a series of resignations. In January, the bank's CFO Gobind Jain resigned. On April 29, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from the bank, following which IndusInd board appointed a Committee of Executives to oversee the operations of the bank, until a new MD and CEO assumes charge.

IDBI Capital has downgraded the scrip to 'sell' rating with a new target price of Rs 680, PTI reported.

ICICI Securities in its note said it believes IndusInd Bank would prioritise balance sheet stability vs. growth while the path to RoA revival remains uncertain, even if it was to get a signature hire.

"We expect a sharp EPS (earnings per share) downgrade in consensus estimates," ICICI Securities said, while retaining its 'sell' rating on the bank with a target price of Rs 650.