IndusInd Bank, which had been deeply hurt last year after disclosure of accounting lapses, is working on a three-year turnaround strategy.

After having a new leadership team under chief executive Rajiv Anand, the private lender has decided to focus on growing in line with the banking system during the next financial year. The thrust in the following year will be to gain market share and in FY29 to dominate in selective areas.

Loan growth for turnaround

Anand’s push will be to get back the steam in commercial vehicle and microfinance loans, which are large businesses for the bank. “Our vehicle finance business, we have about a 7.5% market share. Our intent is to take that back to 9% as we go forward,” he said.

A similar drive will be to regain lost ground on the microfinance business, which has been under stress for the last several quarters for all banks. As a corrective measure, IndusInd Bank earlier this year tightened the asset quality norms for microfinance loans to spot early stress indicators.

Anand told analysts in a post-earnings call that in the microfinance segment the bank will continue to monitor the collection efficiency and aim to move towards normalisation in the coming months. Slippages in this segment is expected to start easing from the fiscal fourth-quarter, supported by tighter underwriting and improving early-bucket indicators.

IndusInd Bank has strategically decided to grow its loan book in small and medium-sized enterprises (SME), where it has a relatively small presence. Ramaswamy Gopalakrishnan, a veteran in the SME and mid-market segments, has been appointed as head to drive these businesses and diversify the bank’s loan book. 

“We are reorganising our structure to serve this segment with appropriate distribution. The portfolio currently stands at Rs 43,957 crore and there is robust scope for us to grow in the years to come,” said Anand. 

While the vehicle finance, microfinance and SME growth engines have to play a key role on the bank’s loan side, the performance in the December quarter has still been weak. The loan book fell 13% on year and 3% on quarter to Rs 3.17 lakh crore as on 31 December 2025.

The degrowth in the loan book was driven by continued rundown in microfinance loans and risk-reward-driven calibration in the corporate book. While micro loans fell 46% to Rs 17,669 crore as on 31 December 2025 from Rs 32,564 crore a year ago, credit to large corporates dropped 40% on year to Rs 50,615 crore. 

Even retail loans fell 3% to Rs 1.61 lakh crore. Home loans, however, rose 94% on year and 10% on quarter to Rs 6,114 crore at the end-December quarter. 

Vehicle finance, which comprises 31% of the bank’s loan mix, rose 5% year-on-year to Rs 98,196 crore at the end of the December quarter. The other significant contributors to the bank’s loan book are retail with 51% and wholesale with 35% (which fell 28% to Rs 1.12 lakh crore).

In the bank’s revival plan on the loan side, vehicle and microfinance business will be critical as they provide higher-yielding assets.  

Deposit revival key to turnaround

However, the key to IndusInd Bank’s turnaround is to post strong deposit growth, particularly at a time when there is a mad scramble for it in the banking system. “The quantity and quality of deposits is my foremost priority. A bulk of my attention and resources are allocated towards this,” Anand said.

The bank is hoping to see a revival in retail deposits in the coming quarters after undertaking several measures, including strengthening the branch as a focal point, prioritizing digital delivery and enabling frontline relationship managers. 

“We have multiple variants of branches through vehicle microfinance and mainstream branches with a restricted bouquet of offerings available in these branches. We are now consolidating multiple formats and making them universal branches in suitable locations. This should drive synergy for both assets and liabilities in leveraging our existing distribution,” said Anand.

For the three months to end-December, IndusInd Bank’s deposits fell 4% on year and 1% on a quarterly basis to Rs 3.94 lakh crore. 

NIM and NPA stress

The bank’s net interest margin (NIM) stood at 3.52% at the end-December quarter, compared with 3.32% a quarter ago and 3.93% a year ago.

The net non-performing assets (NPAs) was at 1.04% in the December quarter, same as the previous three months but higher than the 0.68% reported a year ago. 

The gross slippages for micro loans during the December quarter are still elevated at Rs 1,022 crore, vehicle finance at Rs 691 crore and consumer banking at Rs 474 crore. 

“The aim is to bring down the stress book through write-offs, etc., but I think we need to keep the interest of all our stakeholders in mind. Our intent is to bring down net NPA well below 1% in the 60-70 basis points vicinity over a period of time,” Anand told analysts. 

Three-year PACE strategy

Anand said the bank is working on a three-year strategy anchored around PACE, which stands for protecting the endowments, accelerating on key priorities, keeping the focus on customer centricity and working on execution excellence. 

Elaborating on endowments, Anand said he believed the bank has unique strengths in terms of vehicle finance and deep rural presence complemented with a robust corporate franchise.

The priority areas, according to Anand, include building a more granular, low-cost deposit base; scaling the bank’s SME and mid-market franchise; and improving stakeholder perceptions.

And what for FY27? “Our intent is to grow in line with market in the year 2026-27 and be in the vicinity of 1% ROA as we get to the back end of that year,” he said.