Ladies and gentlemen, please stay connected. The call will begin shortly. Participants, you have been connected to IndusInd Bank Limited conference call. There is a delay of five minutes. Please stay connected. The call will begin shortly. Thank you. Ladies and gentlemen, as for the recent update for the IndusInd Bank conference call, the board meeting is still in progress. Henceforth, the call will be rescheduled to 6:15 P.M. We regret for the inconvenience. Participants, as for the recent update from IndusInd Bank, the call is rescheduled as the board meeting is still in progress. The call is rescheduled to 6:15 P.M. We regret for the inconvenience.
Ladies and gentlemen, as for the recent update from IndusInd Bank, this conference call has been rescheduled to 6:15 P.M. as the board meeting is still in progress. We regret for the inconvenience. Participants, this conference call has been rescheduled to 6:15 P.M. as the board meeting is still on. We regret for the inconvenience. Ladies and gentlemen, as for the recent update from IndusInd Bank, the call has been rescheduled to 6:15 P.M. The board meeting is still in progress. We regret for the inconvenience. Participants, as for the recent update, the conference call has been rescheduled to 6:15 P.M. The board meeting is still in progress. We regret for the inconvenience. Thank you. Ladies and gentlemen, good day and welcome to IndusInd Bank Limited Q4 FY25 earnings conference call.
As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Mehta, Chairman, along with the management of IndusInd Bank. Thank you, and over to you.
Thank you, dear all. First of all, good evening, and thank you for joining this call. My sincere apologies for the delay, and this was on account of an extended board meeting that has ended just shortly earlier. I'm Sunil Mehta, Chairman of IndusInd Bank. I'm joined by Soumitra Sen and Anil Rao from the committee of executives and the rest of the senior management team of the bank.
It is typically unusual for a part-time non-executive Chairman to address the investors and analysts. However, given the recent chain of events, the board and the management felt it's appropriate to use this opportunity for the board chair to also engage directly with you. Thank you for giving me this opportunity. As you know, we have seen multiple material developments since March. At the outset, we acknowledge that these developments are unfortunate for any organization, and it's painful to see these taking place, particularly in your own. However, the board is determined to address all identified issues so that we can move and resolve to move appropriately forward. I want to first spend a few minutes on the approach taken by the board to address the issues at hand.
The irregularities disclosed indicate an inadequate emphasis on accounting analysis and rigor, as well as lapses in and violations of governance norms, internal controls, disclosure, and reporting mechanisms to the board. The board was not informed of the discrepancies, including at the time of approval of the financial results for the relevant accounting periods. Upon being made aware of the irregularities since March 2025, the board has swiftly taken active steps in understanding and addressing all areas of concern holistically and disclosing progress transparently at all appropriate stages. The board and the management set forth its desire of maintaining trust in the institution by aspiring for and implementing higher standards of transparency and compliance. The board is closely working with management and all relevant stakeholders so that the bank can be forthcoming in highlighting any irregularities which need to be addressed.
The board, along with the management, has spent considerable time and effort in assessing in a timely manner all the irregularities brought to our attention. Wherever required, we sought assistance of reputed external professional firms in addition to detailed internal reviews. The bank is announcing this year's financial results slightly later than what it has done so in the past. Given the events which have transpired, the statutory auditors have done substantive checks with wider sample sizes to analyze any anomalies in financial reporting so that all the identified issues can be adequately and fairly accounted while finalizing Q4 results for financial year 2024-2025. The board and its committees are working with the management and external advisors to identify and address the root causes, rectifying any lapses in systems or processes, and imbibing learnings to tighten internal controls. These shall be reviewed and implemented under the board's oversight.
We strongly believe these extra steps should help in avoiding such incidents happening in the future. While we address these immediate issues, we are also cognizant of the need to reinforce the governance culture and long-term sustainability of the organization. We are institutionalizing ethical best practices, robust systems, and processes while rebuilding the talent desirous of delivery on such a framework. The Board is also in the process of taking necessary steps to assess roles and responsibilities and fixing staff accountability as per the extant laws and internal code of conduct. We are approaching these aspects with utmost seriousness without fear or favor to anyone involved in precipitation of these issues. The Board is also continuously engaged with the regulators. The Board would like to express its gratitude to the regulators and particularly the RBI for its support and guidance in helping navigate these challenging times.
Whilst we have shared updates through stock exchange information and also as part of the financial statements for Q4 2024-2025, financial year 2024-2025, which have been disclosed, I will summarize the recent events and financial performance as follows. Number one, the derivative accounting issue. The bank has received final reports from both external firms, and the financial impact is broadly similar to the earlier initial internal assessment. The bank has already discontinued internal accounting trade since 1st April 2024 and is in the process of taking further measures to improve internal controls and processes to prevent such lapses occurring again. The board has also taken a very serious view with respect to staff accountability across levels to reinforce the governance and compliance culture and is in the process of taking actions for staff accountability. Number two, additional rigorous review.
In addition, in light of the derivative accounting issue, the board has also worked with the management and the statutory auditors to undertake an enhanced and much more rigorous review as part of finalizing the financials, including thorough reviews by the internal audit department of the bank. As part of this exercise, the bank has identified the following significant matters which have been appropriately accounted for in the financials for Q4 2024, financial year 2024-2025. Number one, microfinance portfolio. The reviews identified that over the first three quarters of financial year 2024-2025, there was incorrect recording of interest income and fee income. The review has also identified the misclassification of certain microfinance loans, which have resulted in under-provisioning and non-recognition of NPAs aggregating INR 1,885 crore. The bank has addressed the underlying cause and is in the process of taking actions for staff accountability. Other matters.
As part of the review, it was also noted that there were certain unsubstantiated balances in other assets and other liabilities accounts of the bank and that an amount approximately of INR 760 crore has been incorrectly classified as interest income instead of other income. Based on review of all these matters and reports received by the board, the board suspects the occurrence of fraud against the bank and the involvement therein of certain employees having a significant role in the accounting and financial reporting of the bank. Accordingly, the bank has directed necessary steps to be taken under applicable law, including reporting to regulatory authorities and investigative agencies and to also fix accountability of all persons responsible for these lapses. The financial impact absorbed in Q4 financials in FY 2024-2025.
The financial impact of all the above has been fully taken in the audited financial statements of the bank for the financial year 2024-2025. The bank's approach towards financials has been to start FY2025-2026 on a clean slate without carrying forward any of the past issues. The bank has thoroughly reviewed all the lines of accounting and has taken a conservative view in some of the accounting treatments. This has reflected in a few one-offs versus the business-as-usual run rates, which we shall delve deeper in subsequent sections. The bank's balance sheet remains healthy after absorbing all these changes with a capital adequacy ratio of 16.24%. I repeat, capital adequacy ratio of 16.24%, a provision coverage ratio of 70%, and an average liquidity coverage ratio of 118% with an excess liquidity of INR 39,600 crore.
The liquidity remains comfortable in current quarter as well, with an average LCR of 139% in the first half of this quarter. I would now refer to the leadership transition. Following the findings of external review announced on 27th April 2025, the bank's CEO and Deputy CEO had resigned from their respective roles thereafter. The RBI has advised the bank to submit proposals for appointment of the new CEO for RBI's approval by 30th June 2025. The board is at an advanced stage in the selection process and is confident that the recommendations will be submitted to the RBI in advance of the timeline prescribed. This will provide strong leadership and management stability at the bank. The board is determined to identify and expeditiously induct strong leadership with right competencies, strong ethics, and the ability to build and scale a robust franchise.
In the interim and as approved by the RBI, the committee of executives, which is Anil Rao and Soumitra Sen, is entrusted to oversee the operations of the bank. The committee of executives is guided by an oversight committee of the board comprising of the chairpersons of the board, the risk management committee, the compensation and nomination committee, and the audit committee of the board. The board of directors and the management team is committed to ensure a smooth transition. I would now like to reinforce the ethos of governance while executing the growth strategy from here on. The board is working with the management to bring in a cultural shift towards achieving high standards of ethics and governance. We want to build an environment of open and honest communication with all the stakeholders, prioritizing long-term sustainability over short-term achievements.
Compliance with extant regulations in form as well as spirit is non-negotiable. A one-bank vision. Breaking the silos by laying a strong foundation would ensure avoiding repetition of such episodes, providing uninterrupted execution on the bank's strategic growth objectives. I will now hand over to Soumitra Sen to take you through the highlights on individual businesses. Soumitra, over to you.
Yeah. Thank you, Chairman. Let me start with the vehicle finance, one of the business pillars of the bank. Our vehicle loan book at INR 95,595 crore grew at 8% YoY and 2% quarter on quarter. The disbursements for quarter four was INR 12,273 crore, which was 3% YoY growth. Full year disbursements were at a whopping INR 47,600 crore. The industry volumes across categories have grown by a single digit during the year. We have maintained stable market share across three categories of commercial vehicle, construction equipment, and passenger cars. We also consolidated our position in tractors as we reinforced our processes and credit underwriting. The asset quality trends have been improving since quarter three after the first half, which was slightly weak. The sequential improvement in gross slippages continued in quarter four as well. It was 0.74 last quarter and it's 0.70 in quarter four.
All the vehicle segments except tractors saw a sequentially stable and improved gross slippages. We refrained from selling NPAs to ARC during this quarter, and we focused on our own collection drives. This, however, optically increases the GNPA ratios. The restructured book in the vehicle finance continues to show a reduction. We started the year with INR 547 crore, and now it's INR 119 crore at the end of financial year 2025. The majority of this reduction has come from upgrades and recoveries. Looking ahead, improving fiscal spends, benign oil prices, falling interest rates, and monsoon being absolutely fine, I think we should be supporting the recovery in the industry volumes. Let me now get into Bharat Financial. The outstanding loan book is now INR 38,169 crore. It's down 2% quarter on quarter, but 15% YoY. The microfinance business showed signs of stabilization in quarter four.
The disbursements were up 1.4% quarter on quarter. We followed a very cautious approach for disbursements with 94% of disbursements in quarter four, with the branches with low flows from the current areas and to customers and centers with high vintage with us. We have implemented the MFIN guardrails effective from April 1, 2025. This restricts disbursements to customers with not more than three lenders. With large customer base unique to us and our conservative ceiling on clients' overall exposure, the impact of the business has been limited so far. We have disclosed early trends in the delinquency buckets, and they have improved in both stock as well as fresh flows of delinquencies. Now, let me give you a brief of the Karnataka situation. It's improving, and the current book net of the collection efficiency in Karnataka has improved from 96.4% in February 2025 to 98.2% in March 2025.
As a result, the 31 to 90 days past due reduced to 2.3% in March 2025, down from 4.1% in December 2024. We have also disclosed trend in all standard overdue customers, that's zero DPD to GNPA, which is heading back to normalcy. The slippages were elevated during the quarter due to the accumulated stress in the earlier quarters and misclassification of certain loan accounts, which was corrected in quarter four. Now, Bharat Superstore, that's the merchant acquiring business under the BFIL banner. We have now 664,000 merchants under this program. The book is INR 7,260 crore, growing at 30% year on year. The share of non-MFI book has improved to 19% from 12% year on year. The total liabilities through BFIL now stands at INR 2,680 crore, up 3% quarter on quarter, and it has 19 million accounts. Overall, the portfolio stress witnessed last year is waning.
As we see the portfolio quality improving in most states, we are cautiously focusing on disbursements in select geographies amongst clients with higher vintage. With the implementation of MFIN guidelines, further strengthening of controls, the Karnataka operations steadily getting back to normalcy. Our focus is to ensure disbursement quality, dedicated efforts on collection recovery, and continued diversification of the loan book. Now, let me brief you about the corporate bank. During the quarter, we let go some of the corporate loans for balance sheet management and liquidity management. Consequently, our corporate loan book has come down by 16% quarter on quarter and 6% YoY. This was only a tactical decision, keeping in mind the short-term objectives of the bank. The overall strategy of scaling up granular and small corporates with selective exposure to large corporate continues to be implemented.
The proportion of A-plus and above rated customers at 77% has been steady YoY . Slight decline quarter on quarter versus 79% of last quarter, but as we go in for some high-rated loans, the weighted average rating was 2.57 versus 2.51 year on year. Now, let me brief you about the diamond business. It continues to show healthy growth, the asset quality with no SMA 1 and SMA 2. While growth is subdued due to weak industry demand, industry we are liaising with the stakeholders for suitable terms in bilateral trade discussions. We are closely monitoring the developments and are comfortable with the exposures as of now. The gross slippages in the corporate book, which were at INR 204 crore, mainly contributed by one restructured real estate amount accounting to INR 140 crore. The full gross slippages for corporate book improved from 44% to 0.44% versus 0.54% year on year.
The corporate restructured book also has now reduced to INR 147 crore from INR 583 crore at the start of the year. Our SMA 1 and SMA 2 book collectively stands at 24 basis points versus 20 basis points quarter on quarter. Overall, while we have consolidated our corporate book during the quarter, we have resumed our disbursements selectively in focus areas, and growth in corporate bank should start reflecting in the coming quarters. Now, let's talk about the other retail assets. Our other retail assets maintained growth momentum with 17% YoY and 6% quarter on quarter. The MSEB book under business banking is at INR 18,232 crore, grew 9% yYoY and 3% quarter on quarter. The LAP book maintains steady traction with 15% YoY and 3% quarter on quarter growth.
We continue to focus on home loan scale-up with outstanding now at INR 4,491 crore, growing at 151% year on year and 43% quarter on quarter. It's a small book, so look, the percentage growth looks very attractive. The credit card spends at INR 27,666 crore were broadly steady. Our market share in credit card spends was at 5.31% based on the latest available data. Overall, we should continue to scale our other assets and at the fastest pace with focus on improving diversification of loan book while increasing the retail secured mix with home loans and MSME. Now coming to liabilities, total deposits was at INR 410,862 crore. It grew 7% YoY while remaining steady at quarter on quarter. Our deposit franchise had shown resilience during the turbulent last couple of months. We are proactively engaged with our customers, rebuilding the trust in the institution.
These initiatives helped stabilize our deposit base with the after-temporary blip post the disclosure on March 10th. The retail deposits as per LCR grew 9% year over year, contributing to 45.1% of overall deposits versus 44.1% year on year. That's a 100 basis points increase in one year. We have carried healthy liquidity during the quarter with the average LCR at 118% and an average surplus liquidity at INR 39,600 crore. The period end LCR as of 31st of March 2025 was at 136% along with surplus liquidity of INR 62,000 crore. The liquidity position continues to be healthy during the current quarter as well, with the average LCR at the first half of the quarter being at 139%. Apart from the short-term disruptions in March, our new initiatives of affluent banking and NRI banking continue to scale up at the healthy and sustained pace. Affluent segment deposits at INR 58,300 crore grew at 9% year over year.
Affluent AUM at INR 1,02,000 crore has now crossed the INR 1 lakh crore mark, growing at 24% YoY. Our NRI segment deposits at INR 58,300 crore grew by 28% YoY. Share of the top 20 depositors is now reduced to 14.8% in March 2025 versus 17.4% YoY. It shows the debulking which we are doing. The share of certificates of deposit at 8.2% of overall deposits and borrowings at 9.7% of total liabilities. Overall, our deposit franchise showed resilience during the turbulent time. Looking ahead, we remain confident on resuming our journey towards building granular retail deposit franchise while keeping our cost of deposits in check. The developments around easing liquidity also goes well for our deposit franchise. Now, coming to the digital traction, the direct digital business continued to scale with efficiency, and overall, 75,000 new-to-bank customers get acquired digitally every month.
Our flagship mobile banking app, INDIE, continued to scale with positive impact on customers adopting the upgraded app. INDIE for Business, our digital app for MSME now has 50,000 registered customers and a monthly transacting base of 75%. That's around 37,500 customers. The bank's easy credit platform for all retail and MSME exposures up to INR 5 crore ticket size processed 15 million applications during the year. Now, some highlights. 100% of the bank's personal loan and credit cards are originated digitally. The platform is compliant with digital lending guidelines, offers digital KYC and fraud checks, real-time decisioning powered by machine learning algos, and digitized disbursements via e-sign, e-stamp, and e-mandate. It is also integrated with the RBI Innovation Hub Unified Lending Interface, that's ULI, an account aggregator. Now, I will request my colleague Anil to cover the financials.
Thank you, Soumitra. This is Anil Rao here.
What I'm trying to do is basically consolidate and provide the key points with respect to the financial performance. As mentioned earlier, we reviewed all our accounts rigorously and have taken a conservative view wherever there were debatable items. We have also provided for all the issues brought to the attention of the board. We are thus starting the new financial year with a clean slate and robust network. Some of these changes, which have a one-time impact, while a few change baseline financials as well. Key financial adjustments are, as mentioned below. Number one, we have reversed other income by INR 1,960 crore on account of derivative-related discrepancies disclosed on March 10th, 2025. Number two, we have reversed revenue of INR 423 crore net of interim provisions and accrued interest towards the accounting error identified by the internal audit team during the review of our microfinance business.
Number three, the bank has also set off unsubstantiated increase in other assets and other liabilities amounting to INR 595 crore. Please note, this has no impact on the profit and loss of the bank. This has no impact on the profit and loss of the bank. Number four, we recognize materially high slippages in microfinance business of INR 3,509 crore. This resulted in interest income reversal of INR 178 crore. Number five, we have reviewed groupings and classification of the P&L items resulting into INR 760 crore regrouped from interest income to other income and INR 158 crore from provisions and contingencies to the other operating expenses. This has no impact on the profit and loss of the bank. I repeat, this has no impact on the profit and loss of the bank.
Adjusted for non-recurring one-offs, the net interest margin for Q4 would have been around 3.47% and a pre-provision operating profit of INR 3,062 crore. If we did not have these one-offs, we would have been at a net interest margin of 3.47% and pre-provision operating profit of INR 3,062 crore. The adjusted financials were subdued versus business as usual run rate, largely impacted by adverse loan mix and conservative liquidity priorities towards the end of the quarter. In terms of asset quality, the gross slippages by key segments were vehicle finance, INR 657 crore, corporate loans, INR 220 crore, other retail, INR 620 crore, and microfinance, INR 3,509 crore. This reflects sequential improvement in all segments other than the microfinance loan book. We have also seen improvement in net security receipts at 27 basis points, restructured book at 12 basis points, and stable SMA 1 and 2 at 24 basis points.
Overall, to conclude, whilst we have reported a loss for the quarter due to the extraordinary events mentioned earlier, we have closed full financial year 2025 with profit after tax of INR 2,575 crore. I'll repeat, we have for the full financial year with profit after tax of INR 2,575 crore. Our capital adequacy ratios remain healthy after factoring all the hits on account of these one-off measures with CET1 at 15.10% and overall CRAR at 16.24%. Our CET1 is at 15.10% and overall CRAR at 16.24%. Now, I hand over the same to the Chairman for closing remarks. Thank you.
Thank you, Anil. Overall, I think after all the business update and the financial update, if I may summarize, we acknowledge as a bank that the lapses which have happened are not expected from a bank like ours.
The board and management is committed to take all necessary steps to restore the trust and confidence in this institution. The board and management has done a deep dive on the issues brought to its attention and has taken actions with a view of pursuing higher standards of governance, transparency, and accountability. This governance culture will be continued to be reinforced as we progress further. The financials now reflect all the items brought to the attention of the board. We are starting financial year 2025-2026 on a clean and strong footing. The balance sheet continues to be robust with healthy capital adequacy, provision coverage, and liquidity levels. The core franchise remains strong, and we are focused on growth opportunities backed by capital strength and conservative liquidity. The bank will scale secured retail and MSME assets, be selective in corporate space, ramp up in retail liabilities, and follow a one-bank approach.
The bank will continue to pivot our rural distribution towards Bharat Banking, albeit being cautious on microfinance as per the current industry conditions. The bank continues to invest in our new businesses such as home loans, affluent banking, and particularly the digital 2.0, merchant acquiring, micro-markets-driven distribution, etc. As mentioned earlier, the search process for the new CEO is at an advanced stage. The incoming CEO will have an advantage to start with a fresh slate. The CEO should have capabilities to scale this differentiated organization, have a strong ethical foundation with proven track record of execution and leveraging evolving technology and customer preferences. There is immense potential for this franchise to deliver sustainable and profitable growth for years ahead.
I would like to end my comments by profusely thanking the support and confidence extended by all stakeholders during this difficult period, which include, but not limited to, our first-ever customers, investors, employees, regulators, media, and all other institutions which I may not have named. The bank will stand by the trust extended by all stakeholders in its action and words. Thank you so much for your patience. I will now open up for questions and answers.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Participants, you may press star and one to ask a question. First question is from the line of Chintan Joshi from Autonomous. Please go ahead.
Hi. Thank you for taking my question. Can I start with just understanding the adjusted numbers? You highlighted that your NIM is 3.47%, which kind of gives us a INR 4,700 crore NII. Is that what you see? Could you talk us through the reported NII versus the adjusted NII number? If you can just give us all the moving parts, that would be helpful to get us some sort of a baseline of what we can take as a run rate number. If you could do the same for the fee income line, that would also be helpful just so that we know we have got the right numbers. The second question is more around closure.
If I think about the matters that we have seen, what are you doing about taking up legal actions against the various issues that have come up in terms of clawbacks, in terms of other legal proceedings? Also, on that same topic of closure, when do you think you can draw a line, and when can you get the confidence that there are no new frauds to be discovered? Is the review still ongoing, and would we need to wait for the new CEO to come in and give a thumbs up before we can be sure about that? Thank you.
Thank you. Why do you not answer the last question?
Yeah. Okay. This is Sunil Mehta, and I will answer the second question first.
I just want to sort of let you know that as far as the entire process of accountability is concerned, we will follow, without fear and favor, the due process of law. Whatever action that needs to be taken will be undertaken based on whatever is required to be done as per law by ensuring that we do it expeditiously. The process will continue. The bank is progressing as normal today, and it does not have to wait for the next CEO to come in. As far as this process of accountability and whatever needs to be done from whoever was accountable for the issues that we have just stated in our communication to you, I will now hand over the second question on the first one relating to NIM.
Sorry. The second question also was about the future, right? When can we get closure on this?
Do we need to wait for the new CEO to draw a line, or do you think the board can draw the line on the various issues, and have you finished identifying all the various issues?
I think what we have done, Chintan, is that based on whatever reviews that have been done, all issues have been duly identified and duly addressed and declared and shared with all stakeholders, including what we have done with you. We will follow, as per law, whatever needs to be taken. It does not need to—we do not have to wait for the new CEO because this will sort of continue. Most of these issues are actually—all these issues have been already reported to the regulatory authorities. The financial impact of all the issues that we have declared has already been undertaken in financial year 2024-2025.
Those financial adjustments have been done. From a financial perspective and doing business, coming back to business as usual, again, that is continuing, and people will start focusing on that. As far as the other stuff is concerned in terms of the, as I said, on accountability, that will continue to follow as per due process of law. Coming back now to the first question.
Chintan, as we mentioned in the comments, normalized net interest income, or let's say a going concern, if we have to see what was the quarter four, if we take out all the interest adjustments and one-offs, etc., the net interest income would come to around INR 4,700 crore. The non-interest income would come to around INR 2,500 crore, give or take something here or there. The operating expenses would be around INR 4,200 crore.
The operating profit would be around INR 3,060 crore is what we disclosed in the opening remarks.
Thank you. I'll run with you offline for all the various adjustments.
Thank you.
Thank you. Next question is from Harsh Wardhan Modi from JP Morgan. Please go ahead.
Hi. Thanks for the call. A couple of questions. One, how do we get comfort around whether these one-offs are more—is this the last kind of set of one-offs in terms of cleanup, or are there going to be more? My second question would be regarding the liabilities. In the last couple of months since closing the year, how much of deposits has the bank lost, and how do we think about the liability strategy of the bank over the next, let's say, six months? Thank you.
If I can come in at the first part that you asked about.
As the Chairman mentioned earlier, the financial impacts of all the irregularities brought to the board's and the bank's attention have been taken into account while we have prepared and disclosed these results. There is nothing that is outstanding today to our understanding. One-offs as such, we have already taken for. Whatever is the business-as-usual impact as we progress, the near-term impact because of whatever liquidity, etc., we carry, that is part and parcel of the BAU. There is nothing one-off per se. There could be some industry or business-related issues that will happen, which is part and parcel of being in this business. From the financials perspective, there is nothing that has not been accounted for in the numbers that we have. As we mentioned in the opening remarks, we have done a thorough check of all the accounts that we have.
We have spent extra time. You have seen that we are almost late by a month to announce the results. So a lot of efforts by all the stakeholders involved have gone into ensuring that the financials reflect the fair and transparent position the bank has. Coming to the deposit side, as you know, we do not disclose within the quarter our deposit base. We have given you how our liquidity position has been. In the first half of the quarter, the liquidity that we have, the LCR is 139%, which is well above the regulatory threshold as well as higher than what we had carried last quarter. In terms of strategy, I will hand over to Soumitra to give his comments.
Hi. See, reliability, especially the utilization, has always been a core thing which we have been talking about.
Apart from the home markets, developed markets, which we do, the new ones which we are talking about, that one-bank approach where all the BUs are now getting into the liability sourcing, and we have different contests and incentives to run for that. Second is that what we are doing is that the criminalization of the accounts, the branch distribution, is now looking at opening the high-value accounts, and that's actually scaling up quite well. You will see that growth happening in the affluent side of the business. The cross-sell, the cross-sell, and especially the NOS, which we look at, the number of sales per person, and that we are seeing that with the one-bank approach, that's actually climbing up quite well.
I feel with the, at least on the granular, and you've seen our retail deposits going up, the percentage from 44.1% to 45.1%, and even during this particular quarter, we are seeing the retail growth is absolutely right on top. I don't see that to slow down in any way.
Just to, before you hand off to your next question, let me just also reinforce the point that was made by [audio distortion] earlier about whatever we have done to bring things to closure. There has been, after these issues were raised or identified, the bank has done an extensive review by both external and internal agencies for identification of all issues or any other issues that could be sort of identified.
As you can imagine, the statutory auditors have also done a very extensive stress test, and obviously, they have fully put in their financial and their report whatever has been identified. Of course, the financial impact, as already mentioned. The important aspect that I have to share with you is that during this process, wherever we recognized or figured or identified controlled weaknesses or any risk areas, those are absolutely being addressed. I think we are using this opportunity from this crisis to do a very deep review of all aspects of systems, controls, procedures, and people to strengthen all to make sure that we have very robust systems and processes in place and with a high level of transparency as we move ahead so that if there are any issues, they must be surfaced expeditiously so that the same can be addressed. I'll stop here.
Thank you. Next question is from [Adarsh] from Enam Asset Management. Please go ahead.
Hello. Hi. Thanks for taking my question. Sir, you did mention about the sustainable or the clean margins and operating profit. Just want to understand historically.
I think your audio is not clear.
Okay. Just one second. Yeah. I hope this is better now. I had a question on the clean operating profit you mentioned. Obviously, the cleaner margins have taken a dip. The free incomes have where we were earlier, right? Historically, kind of the banks had hard time. Just wanted to understand how sustainable you think the free income streams are. As we de-risk the book, does this free income kind of take a knock?
As you would see, some part of the net interest income has got reclassified into the free income.
We have given that information in the disclosure as well. Because of that, the fee income is where it is. Going forward, as you know, the strategy which Chairman Soumitra, etc., covered, is part and parcel of our business. Some of the areas that we are into are higher fee-generating businesses. It is a mix of what kind of loan mix that we aspire for, what kind of the segments that we are in. I am sure the board and the management, as well as the incoming CEO, will have a say into how we want to progress. I think it will be a little bit premature to comment on what should be our fee income or the fee-to-asset ratio, etc., going forward. Let's see how every quarter goes.
Okay. The second question is, sir, how should one look, like, since you have taken a full stock of the MFI NPAs? You have kind of provided a lot as well. Does this mean now that when you say we start on a clean slate, our credit costs go back to what the normalized bank's credit costs were, or it is kind of still uncertain? We have taken a large part of it, but we are not sure of how credit costs would behave incrementally.
Overall, Adarsh, you would have seen even in this quarter, excluding microfinance, our slippages, credit costs, etc., in other segments have been better or stable. Excluding microfinance, we have not seen any issues as such. Those businesses continue to be in the steady state. The microfinance side, we have taken additional slippage this quarter, additional slippage this quarter.
We have also given one additional disclosure, if you would have seen, in microfinance segment. There is a zero-day plus book. We have given a trend. You would see that the zero-day plus book is almost coming back to normalcy where it was in last year's March. That gives us confidence that the incipient unrecognized stress is coming back to normalcy. Having said that, as you know, the situation in some of the states is still evolving. There are a few elections in the next 12 months. We do not think the next year in microfinance will be back to normalcy. I think there should be a step down, obviously, given the number that we have reported. In which case, there will be a step down from the current quarter slippages, but it will still be elevated versus the business as usual.
Maybe in the second half of the year, you will see things progressing back to normalcy. That is our base case today. Let's see how the MFIN guardrails, the industry elections, and some of the monsoon-related implications happen. That is where we are. We are cautiously looking at this business, but normalcy is maybe six months away.
Got it. That is useful. Thanks.
Thank you. Next question is from Ankit from Nomura. Please go ahead.
Good evening. I have one question. We had around INR 1,325 crore of contingent provision traps as of last quarter. Have we utilized those in this quarter?
Yeah. That has been utilized.
Okay. That is it from my side, yeah. Thank you.
Thank you. Next question is from Piran Jainya from CLSA. Please go ahead.
Piran, may I request you to unmute your line and proceed with your question, please?
[audio distortion], am I audible? Yes. Yeah. Am I audible?
Yes, you are.
Yes, you're audible.
Thanks. Speaking my question, just on the INR 3,500 crore slippages.
Sorry, we are losing your audio. Your voice is breaking. Can I request you to come back for a phone, please?
I should be audible now. [crosstalk] . Yeah. So the INR 3,500 crore slippages, just wanted to understand, did that slip in the quarter, or had it slipped earlier, but you've recorded it now because of some recording laps earlier or internal control laps?
We have given notes to account where we have given this background. There is around INR 1,800 crores of loans which were incorrectly classified into certain other categories, and that resulted in them being recognized in more than 90 days.
Those classifications have been rectified in this quarter. There was a review going on, which we have also disclosed. So the INR 1,800 crore is where the correct classification of the underlying customer base has resulted into them. And that correct classification, as you would know, happens from the initial day and those original deputies, etc., properly accounted for. Just that the classification back to 90 days resulted in additional slippage of INR 1,800 crore. The balance is business-as-usual slippage. It is also higher. We understand, and that's what we have been discussing throughout the year. The slippages accumulated or the overview book accumulated over the nine months has turned into NPA in this quarter. Those two segments, those two subsegments are driving the microfinance slippage.
Got it. Okay. This is clear, [audio distortion]. And then secondly, what is the strategy now in this business?
Given what all has happened, one is the environment and second is internal controls, accounting, etc. Is it fair to say that we continue to regrow this book?
Chairman Sir had mentioned earlier that we will be cautious on microfinance segment. The approach of disbursement in the customers with long vintage, with better past payment record, those approaches will continue. The diversification into merchant advances continues. However, if you are expecting me to push, pedal, or change the disbursement approach towards reducing than what it is supposed to be, I do not think so. Business-as-usual disbursements will continue, but we will not be overly either cautious or aggressive in this segment. Whatever is flowing through our credit filters, we will be willing to take it. We are waiting and watching on how the underlying industry is evolving.
As you know, the MFIN guardrails, the monsoon, as I do not want to repeat it again, we are watching all those events. Once in which case the leadership is established, then the board and the management will take a relook at the bank strategy, which segments we want to push, which we want to stay a little bit cautious. You would have noticed our capital adequacy is still about 15%. So there is growth capital available to the bank. The management, the board will decide at appropriate time what should be our medium-term, long-term loan mix that we should aspire for. Understood.
Okay. This is clear. Thank you and wish you all the very best.
Thank you.
Thank you. Next question is from line of Subhradeep Mitra from Nippon India. Please go ahead.
Yeah. Hi, sir. Sir, I have two questions.
The first one is that what led to the reduction of the corporate book from INR 170,000 crore to INR 140,000 crore during the quarter? My second question is, if I look at your net interest income, even if I adjust for the one-offs, it comes to around INR 4,700 crore for the quarter against a normal run rate of approximately INR 5,300 crore. What explains that difference?
The other business-as-usual is also impacted because of the normal interest reversals that have happened because of the slippages during the quarter. That has an impact. There is additional impact because of the events in March. We had to carry excess liquidity. That liquidity comes at a cost because we are deploying it in a lower-yielding asset. Thirdly, the loan mix has become loan mix because of the microfinance loans being written off. The yield on the book has been depressed.
There are other business-as-usual impacts on the net interest income, which are relevant to the events that happened in the quarter, which we cannot say are one-offs or whatever. We have just given you one-offs where we need to act upon because of maybe some inaccuracies or prior-period items, etc. Those have been accounted for. The INR 4,700, which we say as business-as-usual, that will change depending on how the current quarter is going, how the next quarter is. That number is something that is the baseline from where we are starting. I appreciate your point that itself is lower because of some of the impacts which happened during the last quarter on our business.
Just to add on the corporate book, it was just a tactical move to build liquidity. The focus is on CCBG, and it will keep on climbing up.
There's no go slow on that.
Sure, sir. Thank you.
Thank you. Next question is from Rikin Shah from IIFL Securities. Please go ahead. Rikin, may I request you to unmute your line and proceed with your question, please?
Are you still now?
Yes.
Yeah. A few questions, please. The first one was in the notes to account number 15, there have been some reclassifications in different P&L line items. Does that impact the P&L, or is it just mere reclassification, and there is no P&L impact of that? That's number one. The second question is, if you could just quantify the total amount of fraud which has impacted P&L in the quarter because some of them have been adjusted against each other. The rest are just reclassifications. That's the second one.
The third question is, while I was commented that the corporate loans were strategically just run off to build up the liquidity, but was there any interest income reversal even in the corporate loans? Because the corporate loan yield has also dipped from 8.8% to 8.07% in the quarter. Those are my main questions. I have a few data-keeping questions, which I'll take probably offline.
Yeah. Some of those one-offs in terms of interest reversals, etc., have been allocated to the underlying businesses because we can't just leave it hanging. Wherever there have been impacts, segment-wise yield, I don't think you will have a comparable to last quarter. I think this quarter, I'm afraid you can't compare yields in the underlying segment because all these one-offs have been reallocated back to the underlying segment.
You would have seen yield in both consumer and corporate is lower this quarter, significantly lower this quarter versus the previous quarter. That's one. Secondly.
[audio distortion], the reclassification to corporate would have happened only if there was irregularity in some recognition on interest income there, right? Or is there some ad hoc reclassification done towards corporate?
There was no reclassification in the corporate book. It was mainly in the fee and income for the retail portfolio. Corporate was intact as it is. The reduction is mainly on account of repository, which has impacted the margin and the liquidity that we have maintained. Yeah. I hope we are clear again.
Yeah. Fair enough. On the other two questions, the notes to account 15, is that just mere reclassification, or is there a P&L impact of the four items which are mentioned in notes?
No, the first part of the notes to account has P&L impact. These have been accounted in the current quarter's numbers. These are the respective lines. We have mentioned it very clearly. The second part is where we have also mentioned these are just reclassification. Those two line items of INR 761 crore and INR 158 crore, they do not have a P&L impact. We have given you, like earlier mentioned, the steady-state business-as-usual numbers, which takes into account all these changes that have happened during the quarter.
Right. Just trying to say that around INR 4,900 crore of frauds had a P&L impact in the quarter. I am just summing up all the numbers which are there. Does that broadly tell you INR 4,900 crore P&L impact?
I would not be able to say or comment on. We have made a filing whether it is fraud, etc. It is still not yet conclusive.
We don't want to get into that. Let's wait and watch. The process is still ongoing. You can compare the BAU versus the reported. That's the difference between the underlying versus the reported number.
Got it. Just one last question, [audio distortion]. Did I understand clearly that the fee income of around INR 2,100 crore in the quarter was also because of certain reclassification from interest income to fee income? The steady-state fee income could be lower than what we saw in this quarter?
What I referred to earlier was around INR 2,500 crore of normalized fee income in this quarter. If we keep aside the derivative-related adjustment that we have done, that number is stable versus quarter three because some of the interest income has got reclassified into the fee income. This INR 2,500 crore is the BAU.
Now, it can go up, down, wherever, depending on how the underlying businesses go, that we will have to see every quarter.
Got it. Thank you so much, [audio distortion]. Yeah. Fair enough. I'll connect subsequently on some data-keeping questions. Thanks.
Next question is from M. B. Mahesh from Kotak Securities. Please go ahead.
Sorry. My question again also is the same as the previous one. The INR 761 crore of interest income which got reclassified, is it possible for you to give us a bit more clarity as to what has caused this?
Mainly, in case of certain items according to some product which were wrongly classified under interest income, it should have been from the beginning, even if it should have been part of it. Apart from reviewing the GL, we have also reviewed the grouping and classification. Based on that, we have corrected it now.
There's no P&L impact.
Sorry, I couldn't get the clarification, sir. The voice was a bit distant.
There were certain items which were from the beginning part of fee income but wrongly classified under interest income. We have just reviewed the overall grouping and classification also, and based on that, we have regrouped in the correct heading. As such, no impact on the P&L. Yes, the classification inside the P&L would change. That's what we have done for the overall.
Can we get the fact that it was incorrectly? I'm just trying to understand what are the examples of it that got reclassified. Just trying to understand the nature of it.
Mahesh, I'll take you through offline. I'll give you some examples. I think it will take some time in the interest of time. We can discuss this also.
Okay. Sure.
There is also an additional income in the credit card line item or card fee income. Can you just clarify that as well?
Some of this relates to that. Some of the interest has been allocated. Again, the fee line items that we have shown, you would see that they also reflect the underlying numbers now. The fee line items of this quarter are not comparable to the previous quarter. All the reclassification, etc., has also been reflected into the corresponding fee line item in that slide. Part of the interest income got reallocated in some of those line items, appropriately reflecting the underlying.
Okay. The second question is that just one, this higher slippages that you have shown on the MFI side, in the normal course of event, which is about INR 1,800 crore, how would you explain that for the quarter?
As I was saying earlier, Mahesh, there have been overdue books which have been the last three quarters. Part of this is also because of the Karnataka state, some of the events which happened. Those slippages are because of those earlier nine-month stress. We have been continuously saying the slippages in quarter four will be higher in four digits, and that's what has happened in this quarter.
Perfect. Sorry, you had indicated this answer in the first part, saying that you will not want to comment on a quarterly performance of the balance sheet. Is it at least possible for you to give a qualitative answer as to how is the position on the liability side?
Mahesh, I explained to you the liquidity ratio. Liquidity takes into account.
No, that is as of March, right? I'm just trying to give an.
No, no.
We have given in release also everywhere, the first half of this quarter until 15th of May, the average liquidity coverage ratio is 139%. So we had given you the period and number of March, and we have almost maintained stable liquidity in the first half. If I'm not wrong, we continue to carry the same as of yesterday also.
Okay. Perfect, sir. Thank you.
Thank you very much. Ladies and gentlemen, we'll take that as a last question. Now, hand the conference over to Mr. Sunil Mehta and the management team for closing comments.
I think I just want to say thank you to all the analysts who have joined this call. I have already stated what I wanted to state in my closing comments, that we are looking forward to rebuilding the bank, and our fundamentals are strong, our capital adequacy is solid.
All the impact from the various negative items have been addressed. We are a clean and a healthy balance sheet that we are building from financial year 2025-2026. Any risk or control weaknesses that have been identified during this excess reviews that have been done by internal and external agencies on the bank across all segments of the bank, they will be all put into action in terms of rectification, correction, strengthening of our own technology and systems backup processes, looking at any breaks that were there in the processes, paying a lot more attention on people because the bank is built on people and sort of making sure that we have the right roles and responsibilities and the right ethical standards for the people to sort of take the bank forward from here.
From a broad vantage point, I can assure you that we are looking at this bank as a bank that will be reinvigorated from here, and the stabilization of this will be as we sort of hand over the baton to the new leader who takes responsibility and moves forward from here. The entire management is working relentlessly to ensure a strong and a highly respected bank of the future from here, which will have a bright future from here. I just want to thank all of you for joining and greatly appreciate the patience and apologies for the delay that we happened in starting this call. Thank you so much.
Thank you very much. On behalf of IndusInd Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.