Gold Silver Reports (GSR) — IndusInd Bank, known for its pristine asset quality, is finding itself increasingly under pressure after it made public its exposure to the troubled Infrastructure Leasing and Financial Services Ltd (IL&FS). The private lender’s stock fell 8.5% on Monday as investors got jittery over the exposure. In its results press release, the lender had said that it has provided ₹275 crore towards to IL&FS though the exposure has not turned bad.
The fears of investors are not completely unfounded as the IL&FS exposure is not the only one troubling the bank. IndusInd Bank has increased its exposure to non-banking financial companies (NBFCs) over the last one year.
The chart above shows how the lender’s exposure has grown over two years.
Its total exposure to NBFCs stood at ₹10,767 crore as of September, an 81% rise from the year-ago period. This rise has primarily been led by NBFCs, excluding housing finance companies, which are typically considered safer than other financiers.
This exposure includes not just loans disbursed and investments into debt instruments, but also sanctioned limits that may not have been drawn. That said, NBFCs are battling a liquidity crunch and the risks to IndusInd Bank’s asset quality have risen mainly from its exposure to these firms.
