Crisil holds off on rating watch for IndusInd Bank, awaits external agency's findings on derivatives discrepancies

IndusInd Bank on ratings watch but said that the final extent of the discrepancies in the bank’s derivatives portfolio will only be known once the external agency submits its findings.

It also said that the discrepancies in accounting of the bank’s derivatives portfolio are likely to have a one-time impact on its financials.

“The final extent of discrepancies in the bank’s derivative portfolio will be contingent on findings of the external agency.,” it said. “Crisil Ratings will continue to monitor the developments closely for impact thereof on the overall credit risk profile of the bank.”

At this juncture, the bank's pre-provisioning operating profitability and capital adequacy remain healthy to absorb this impact, Crisil said.

Moody's Investors Service on Tuesday placed IndusInd Bank’s Ba1 Baseline Credit Assessment (BCA) under review for a potential downgrade following the private sector lender’s recent disclosure of discrepancies in its derivatives portfolio. While Moody’s expects the near-term impact on IndusInd’s profitability and capital to be manageable, it emphasised that the lack of effective internal controls remains a significant credit concern.

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The rating agency said that the review for downgrade reflects concerns over the negative impact of the accounting discrepancies, combined with stress in the bank’s retail unsecured loan portfolio, which could adversely affect its profitability, capital and funding.

Moody’s also highlighted the uncertainty surrounding potential leadership