IndusInd Bank’s crucial microfinance arm faces escalating turmoil. Significant leadership exits plague Bharat Financial Inclusion Ltd (BFIL). This crisis follows intense scrutiny of its loan portfolio. Discoveries of incorrect balances triggered the probe. Poor loan loss provisioning also sparked concern.
Senior executives are rapidly departing the subsidiary. Officials originally appointed by IndusInd Bank are stepping aside. Vikas Muttoo, Chief Operating Officer, has already resigned. His joint COO, Anujeet Varadkar, also quit BFIL recently. These people possess direct knowledge of the situation.
Indusind Bank Limited’s stock, with a market capitalisation of Rs. 64,813 crores, fell to Rs. 828, hitting a low of 0.46 percent from its previous closing price of Rs. 831.85. Furthermore, the stock over the past year has given a negative return of 44.4 percent.
Muttoo joined BFIL only last year, in 2023. He previously worked with RBL FinServ. IndusInd Bank specifically appointed him to lead microfinance. Varadkar arrived even more recently, in early 2024. He is the former MD & CEO of Svatantra Microfinance. BFIL brought him in to stabilise operations. The unit showed alarming turbulence before his arrival.
This leadership drain isn’t isolated. Last month, Executive Vice Chairman J Sridharan quit too. Now, BFIL promoted Gopi Krishna A. He leads member services now. Krishna is a nearly 20-year veteran. He stayed through BFIL’s past as SKS Microfinance. IndusInd Bank acquired BFIL back in 2019.
Senior Exodus Continues
All three high-profile exits followed a critical bank decision. Internal auditors initiated a portfolio review immediately. EY consultants supported this investigation fully. Audits commenced after finding incorrect account balances. Following this, serious financial discrepancies emerged.
The bank’s March 2025 quarter results revealed shocking errors. Microfinance recorded Rs. 674 crore in wrong interest income. Furthermore, it logged Rs. 173 crore in incorrect fee income. Loan account misclassification compounded the problems. Therefore, the bank needed extra provisions. It set aside roughly Rs. 2,000 crore because of this
Audits Reveal Deepening Problems
This microfinance unit has faced trouble before. Significantly, in 2021, a whistleblower alleged improprieties. These included accusations of loan evergreening at BFIL. IndusInd Bank denied those allegations strongly then. However, it confirmed a major technology failure.
A faulty tech patch deployment occurred previously. It opened 84,000 loan accounts improperly. Customer consent was completely absent. An audit followed those events. Ultimately, it yielded no concrete results.
Portfolio stress metrics are now rising sharply. Gross microfinance loans totalled Rs. 30,909 crore by March 2025. This represented 9% of IndusInd’s total loans. Gross NPAs for microfinance hit Rs. 4,531 crore. That equals a troubling 13.18% of the segment. Previously, in Oct-Dec 2024, NPAs were Rs. 2,432 crore, or 7.05%.
History of Troubles
IndusInd Bank first disclosed derivatives issues on March 10. It reported accounting problems then. These caused an approximate Rs. 2,000 crore financial hit. Later, SEBI’s interim report made damning findings. Kathpalia and Khurana knew of the issue by December 2023.
By February 2024, top executives foresaw the financial impact. Instead of informing shareholders, they sold personal shares. Consequently, SEBI investigates potential insider trading now. Other regulatory issues remain under review.
Stress in microfinance loans
Internally, the bank spotted higher delinquencies recently. This discovery occurred around March-April 2025. EY then audited the MFI portfolio thoroughly. Grant Thornton handled a forensic audit concurrently. It addressed derivative accounting lapses, too.
Grant Thornton now recommends process fixes. Remedial steps are underway currently. However, financial impacts could linger for some time. Out of the Rs. 6,000–7,000 crore in questioned loans, the bad debt portion remains unclear. IndusInd Bank’s microfinance crisis continues unfolding. Leadership stability and portfolio health are major concerns.
Written By Fazal Ul Vahab C H
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