IndusInd Bank Targets 1% RoA by FY27: Strategic Turnaround

IndusInd Bank is strategically targeting a 1% Return on Assets (RoA) by the end of fiscal year 2027, marking a pivotal phase under CEO Rajiv Anand. This objective follows a year dedicated to stabilizing its balance sheet and re-establishing loan growth after significant governance and microfinance portfolio challenges.

Key Numbers Driving Recovery

• Target RoA: 1% by FY27.
• Current Annualized RoA (June-end): 0.78%.
• Q1FY27 Consolidated Net Profit: Increased by 75% sequentially.
• Retail Deposits: Now a record 49.5% of total deposits.

Anand assumed leadership in August 2025, inheriting a bank grappling with an accounting crisis in March 2025. This crisis stemmed from discrepancies in its derivatives portfolio, which led to a substantial stock price drop and regulatory probes.

A forensic review conducted by Grant Thornton identified critical weaknesses. These included internal control failures and an over-reliance on manual accounting processes, extending beyond derivatives to issues with microfinance interest income recognition and unsubstantiated balances.

Q1FY27 Performance and Strategic Adjustments

Recent Q1FY27 results demonstrate a positive shift, with the bank returning to positive loan growth and showing improved asset quality. The strengthening of retail deposits underscores a critical rebalancing in its funding structure.

The bank plans to align its loan growth with industry trends for FY27. Furthermore, it aims to gradually rebalance its asset mix towards higher-yielding retail and SME products, as part of a broader three-year strategy.

Ongoing Hurdles and Future Roadmaps

Despite the recovery, obstacles persist, particularly within the microfinance portfolio, which saw significant write-offs in Q1FY27. Regulatory bodies such as SEBI, SFIO, and NFRA continue their scrutiny over alleged insider trading and past governance lapses.

Analysts suggest that while achieving a 1% RoA is important, it represents only a stepping stone. For higher valuation, IndusInd Bank must achieve a Return on Equity (RoE) that surpasses its cost of equity, a more comprehensive measure of shareholder value creation.

IndusInd’s three-year strategy outlines market-aligned growth in FY27, market share gains in FY28, and leadership in specific focus areas by FY29. However, the bank faces ongoing challenges from margin pressure, intense market competition, and the crucial task of rebuilding trust in its liabilities franchise amidst shifting household savings.

While profitability has been restored, the more formidable challenge for IndusInd Bank lies in comprehensively restoring overall confidence in the institution among all stakeholders.