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Global rating agency Moody’s, which is currently reviewing IndusInd Bank’s risk management practices and leadership stability, indicated that a one-notch baseline credit assessment (BCA) downgrade could be offset by incorporating government support, reflecting IndusInd’s systemic importance, thereby preserving the Ba1 rating.

To maintain its current BCA, Alka Anbarasu, Associate Managing Director, Moody’s Ratings, said the agency expects IndusInd to stabilise asset quality, profitability, and capital while ensuring steady funding and liquidity.

The bank must also address deficiencies in financial controls and resolve uncertainties surrounding senior leadership, she said, during an interaction with Moneycontrol.

“The financial impact of the derivatives losses is quite manageable considering IndusInd Bank’s strong capital. But it is really the risk management capabilities of the bank, which is what we are watching out for in terms of the review,” Anbarasu said.

The review, announced on April 23, was triggered by a March 2025 decision to place IndusInd’s BCA on watch for a potential downgrade, following disclosures of inadequate internal controls in derivative transactions.

A recent stock exchange filing revealed that an external agency identified discrepancies, quantifying the negative impact at Rs 1,979 crore as of June 30, 2024.

Leadership transitions at IndusInd also remain under scrutiny, as stable governance is critical to resolving these issues, Anbarasu added.

Despite the concerns, Moody’s affirmed IndusInd’s Ba1 long-term ratings for foreign and local currency bank deposits on March 17, 2025, with a stable outlook, citing the bank’s “robust capital, core profitability, and stable funding.”

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