Rating agency Moody’s Ratings on Monday (March 17) said it has affirmed IndusInd Bank’s Ba1 long-term foreign and local currency deposit and issuer ratings with a stable outlook while placing its ba1 Baseline Credit Assessment (BCA) and adjusted BCA under review for a potential downgrade.

“We have also affirmed IndusInd’s (P)Ba1 senior unsecured medium-term note program rating, Ba1 LT and NP ST FC and LC counterparty risk ratings, Ba1(cr) and NP(cr) LT and ST counterparty risk assessments respectively. At the same time, we have placed IndusInd’s ba1 Baseline Credit Assessment (BCA) and adjusted BCA under review for downgrade,” Moody’s Ratings said.

The rating agency cited IndusInd’s strong capital position, core profitability, and stable funding as factors supporting its current rating. However, the review for the downgrade of the BCA reflects concerns over inadequate internal controls related to the bank’s accounting for derivative transactions.

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Additionally, stress in retail unsecured loans could further impact the bank’s profitability, capital, and funding.

Moody’s noted that while a one-notch downgrade of the BCA is possible, IndusInd’s systemic importance might lead to the incorporation of government support, which could help maintain its Ba1 rating. The agency will monitor developments related to IndusInd’s financial controls, risk management, and senior leadership stability before concluding its review.

A downgrade of IndusInd’s BCA could occur if external reviews reveal adverse findings on its derivative accounting or if asset quality deteriorates significantly, affecting profitability and capitalisation. Conversely, Moody’s could maintain the current BCA if the bank stabilises its asset quality, financial performance, and leadership.

Also Read: IndusInd Bank shares surge over 4% after RBI assurance on capitalisation, deposits

Shares of IndusInd Bank Ltd ended at ₹676.95, up by ₹4.85, or 0.72%, on the BSE.