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IndusInd Bank's microfinance lending under lens amid internal audit

IndusInd Bank's microfinance lending under lens amid internal audit

IndusInd Bank is under review for microfinance lending practices, with Rs 6,000-7,000 crore in loans being scrutinised. The bank has commissioned EY and Grant Thornton for audits.

Aseem Thapliyal
Aseem Thapliyal
  • Updated Jun 24, 2025 11:56 AM IST
IndusInd Bank's  microfinance lending under lens amid internal auditThese loans are under the lens for potentially improper lending practices, particularly in the context of small-ticket unsecured loans that may have been incorrectly classified,
SUMMARY
  • Loans worth Rs 6,000-7,000 crore under investigation for improper classification
  • Some loans were misclassified as agriculture loans without repayment schedules
  • Internal review by IndusInd Bank involves EY and Grant Thornton audits

Private sector lender IndusInd Bank is currently facing scrutiny over its microfinance loan portfolio, with a focus on loans approximating Rs 6,000-7,000 crore. These loans are under the lens for potentially improper lending practices, particularly in the context of small-ticket unsecured loans that may have been incorrectly classified, according to a Moneycontrol report.  

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"What has happened is not a classic case of loan rollover but something like that," the report cited one of the bankers aware of the investigations as saying. The Moneycontrol report cites sources indicating that these loans were initially provided to prevent existing microfinance institution (MFI) loans from turning bad, and some were reportedly classified as agriculture loans, which lack structured repayment schedules. "Classifying these loans as agri-loans could have been beneficial to the bank, as these loans do not have a structured monthly or weekly repayment schedule and become due for repayment only at the end of the year," commented another banker who wished to remain anonymous.

In response to these allegations, a comprehensive internal review has been conducted by IndusInd Bank, with EY auditing the MFI portfolio and Grant Thornton leading a forensic audit to address faulty processes, including those in derivative accounting. "This practice was quite prevalent at the bank till about July–August last year," noted a senior official in the microfinance industry. However, a spokesperson for IndusInd Bank refuted these claims, stating, "The report is false, inaccurate, and speculative. As part of its microfinance business, IndusInd Bank Limited lends only to women and not their spouses." The bank emphasised its commitment to supporting women's financial independence through targeted microfinance products.

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The implications of these findings indicate potential procedural lapses within the bank's microfinance operations. "Customer details and KYC of the borrower and her spouse would be completely different and hence to plot how the MFI loan was regularised would be extremely difficult," highlighted a senior official in the MFI industry.

Despite these challenges, IndusInd Bank maintains its focus on providing small-value unsecured loans to women, particularly in rural areas, directly at their doorsteps. "Women are central to our microfinance business, with products designed to foster financial independence and support their entrepreneurial endeavours," reiterated the bank's spokesperson. The bank is awaiting further recommendations from Grant Thornton to rectify any procedural deficiencies identified during this period.

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Published on: Jun 24, 2025 11:32 AM IST
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