By Siddhi Nayak and Nishit Navin
BENGALURU/MUMBAI (Reuters) -India’s IndusInd Bank on Friday said it expects to see stress in the microfinance segment stabilising from the first quarter of the next fiscal year, after it reported a drop in third-quarter profit due to delinquencies in these loans.
“We remain cautious on the microfinance segment. While the slippages (in the microfinance segment) may get elevated for another quarter, our customer base is showing early sign of stability which should start reflecting from Q1FY26 onwards,” CEO Sumant Kathpalia said in an earnings call.
Banks have reported stress in the microfinance segment from the start of the ongoing financial year, largely triggered by high borrower indebtedness, falling rural incomes, and election-related disruptions.
IndusInd’s NPA in the microfinance category rose to 24.32 billion rupees from 22.59 billion rupees a quarter ago. The segment forms 9% of the bank’s total loans.
The bank’s provisions and contingencies, or funds set aside to cover loan losses, jumped 87% to 17.44 billion rupees.
The higher provisions dragged the private lender’s profit down 39% year-on-year to 14.01 billion rupees, slightly missing analysts’ estimates of 14.11 billion rupees.
Its gross non-performing assets ratio deteriorated to 2.25% from 2.11% three months earlier and 1.92% a year ago.
Net interest income – the difference between interest earned and paid – fell to 52.28 billion rupees from 52.96 billion rupees a year ago. Net interest margin shrunk to 3.93% from 4.08% in the previous quarter and 4.29% year ago.
“We have to wait for the microfinance (segment) to play out; I think it should play out in Q4 (FY25). I think we should be back to 4% and above NIMs starting first quarter of next year.” Kathpalia said.
IndusInd’s loans grew 12%, while deposits rose 11%.
Kathpalia said that once the microfinance book stabilises, the bank should start seeing loan growth of 15%-16%.
($1 = 86.6030 Indian rupees)
(Reporting by Nishit Navin and Siddhi Nayak; Editing by Varun H K)
