IndusInd is only the latest in a series of Indian banks facing RBI scrutiny & stock price crashes

Over the years, multiple banks have come under regulatory scrutiny, dealt with financial setbacks, and triggered stock market concerns. A look at the major incidents.

Illustration by Ramandeep Kaur | ThePrint

New Delhi: The past 10 days have been quite tense for those tracking India’s banking sector—especially IndusInd Bank, India’s fifth-largest private bank. The bank has ruled banking sector news ever since its shares plummeted on 11 March by 27 percent—the steepest one-day loss in its history—followed by further declines.

This came after a series of governance and financial discrepancies that have rattled investor confidence, and follows a move by the Reserve Bank of India (RBI) to force IndusInd to find a new CEO from next year onwards.

However, IndusInd isn’t the first bank to face regulatory scrutiny, financial troubles, and stock market panic in the past few years. ThePrint looks at some of the other major incidents.

Kotak Mahindra Bank 

One of the latest in the row of private bank crises is Kotak Mahindra Bank, which faced regulatory scrutiny and operational restrictions last year. In April 2024, the RBI imposed strict restrictions on the bank, prohibiting it from onboarding new customers through digital channels and issuing new credit cards.

The decision stemmed from concerns over significant IT infrastructure and information security deficiencies. These restrictions remained in place for nearly 10 months before being lifted by the RBI, signalling improvements in the bank’s compliance measures.

In a separate controversy, the bank was also dragged into the high-profile Hindenburg-Adani dispute, with the US-based shortseller alleging that the bank played a role in facilitating an offshore fund used to short-sell Adani Group stocks. The bank firmly denied any wrongdoing.

The markets reacted strongly to these controversies, leading to a fall of 10 percent in the private bank’s share in April 2024 after the RBI ban, followed by a 4 percent fall in July 2024 after the Hindenburg allegations.

However, the negative news had a muted impact on the 2024 Q4 results of the bank. Kotak Mahindra Bank’s Q4FY24 results, released in May 2024, showed a consolidated profit of Rs 4,133 crore (up 18 percent year-on-year) and a Net Interest Income (NII) of Rs 6,909 crore (up 13 percent year-on-year).

According to the latest financial results, the bank seems to have recovered well from the last shock, recording a 10 percent year-on-year rise in net profit to Rs 4,701 crore for Q3 FY25, alongside a 10 percent increase in NII to Rs 7,196 crore. It is also among the top five best-performing banking stocks on the share market, trading currently at Rs 1991.9.

IDFC First

IDFC First Bank has been grappling with financial headwinds, marked by a sharp decline in profitability and stock performance. The bank reported a staggering 73 percent year-on-year drop in net profit for Q2 2024, falling to Rs 201 crore from Rs 751 crore the previous year.

This decline was primarily driven by increased provisions for its microfinance portfolio, which more than doubled in Q3FY25, soaring by 104 percent to Rs 1,338 crore due to rising bad loans. Collection efficiency in the microfinance segment also saw a slight dip, falling from 99 percent in June 2024 to 98.6 percent in September 2024. These concerns, coupled with a 15 percent year-on-year decline in net profit, triggered a 7.2 percent fall in the bank’s stock price, pushing it to a 21-month low.

Beyond financial pressures, IDFC First Bank has also faced regulatory scrutiny, including potential warnings from SEBI and a ban on Futures and Options (F&O) trading for its stock. The ban was placed because too many traders were betting on the stock, crossing permissible limits put in place to prevent extreme price swings and speculation in the market. 

Following these developments, the bank’s shares dropped nearly 8 percent to a 52-week low Tuesday at Rs 53.12 after reporting a 53 percent decline in Q3 net profit to Rs 339 crore due to increased provisions from higher loan slippages.

In the Q3 results for 2025, the bank’s Net Interest Income (NII), grew 14 percent Year-on-year from Rs 4,287 crore in Q3 FY24 to Rs 4,902 crore. While presenting the results, IDFC made its stance clear on microfinance loans saying, “Bank continues to de-grow its Microfinance portfolio, which as % of overall loan book reduced from 5.6 percent in Sep-2024 to 4.8 percent in Dec-2024”.

In the latest session, the stock continues to trade flat at Rs 52 on BSE. The bank’s stock has declined 28 percent in a year and 23 percent in 6 months. Its market cap stands at Rs 40,202.

HDFC Bank

HDFC Bank, the largest private sector lender in India, too, faced a tumultuous period following its merger with HDFC Ltd, the housing finance company, in July 2023. While the merger expanded the bank’s loan portfolio, it also led to a sharp rise in its loan-to-deposit ratio (LDR), which climbed to approximately 110 percent.

This means the bank was lending Rs 110 for every Rs 100 in deposits, raising concerns about its liquidity and long-term stability.

The market reacted strongly to these developments, with HDFC Bank’s share price witnessing a significant decline.

Its shares declined by 2 percent in July 2023, from Rs 1,794 to Rs 1,588 after its first post-merger quarterly results, which disappointed Dalal Street. It, however, recovered from that shock. Again, in September 2024, the sharp rise in LDR caused troubles for the bank, pushing the stock price down by 9 percent from Rs 1,788. During this time HDFC Bank also lost Rs 1 lakh crore in market capitalisation.

Currently the bank’s share is priced at Rs 1,752, trading in green.

Investor confidence was further shaken by regulatory scrutiny from the RBI, which imposed penalties, including a Rs 10 crore fine for deficiencies in its auto loan portfolio.

HDFC Bank reported a 2.2 percent year-on-year rise in Q3FY25 net profit, with net interest income growing 8 percent Year-on-year. Margins remained stable, though asset quality weakened slightly as Gross NPA increased. Despite this, HDFC Bank’s share price rose after the results announcement, and the stock continues to trade in the green amid looming uncertainty on bank stocks.

YES Bank

When we are on the topic of financial losses that private Indian banks have faced, one cannot miss YES Bank, one of the largest players in the business.

YES Bank’s crisis came to a head in March 2020 when the RBI imposed a 30-day moratorium, dissolved its board, and appointed Prashant Kumar—then CFO and deputy MD at State Bank of India (SBI)—as administrator. During this period, deposit withdrawals were restricted to Rs 50,000 per person.

To revive the bank, the RBI proposed a reconstruction plan, allowing SBI to acquire up to a 49 percent stake in the bank.

The downfall of YES Bank was primarily driven by an aggressive expansion of its loan book, which significantly outpaced deposit growth, straining its financial stability. By September 2019, its loans had surged to Rs 2.25 trillion, while deposits lagged at Rs 2.10 trillion. Rising NPAs—highlighted by RBI’s asset quality reviews in 2017-18—exposed governance lapses.

The bank’s substantial exposure to stressed entities like IL&FS and DHFL, coupled with NPAs reaching Rs 17,134 crore, further weakened its position. Governance concerns worsened investor confidence, with independent director Uttam Prakash Agarwal resigning in early 2020 over regulatory and compliance failures. These factors triggered a surge in deposit withdrawals, exacerbating the crisis.

Following the RBI action, YES Bank’s stock plummeted, declining 55 percent to trade at Rs 16 on 6 March, 2020. The years 2020 and 2021 did not come out to be good for the private sector lender as its shares decreased by 62 percent in 2020 and a further 23 percent in 2021. The early signs of recovery only kicked in 2022, when the bank focussed on again raising capital and appointed fresh management.

In the latest Q3 FY2025 results, YES Bank recorded a net profit of Rs 612.3 crore, surpassing analyst estimates. The revenue also increased by 14.22 percent Year-on-year to Rs 9,416.05 crore. Though the bank shares could not bounce back to their original levels, its shares traded at Rs 17 Wednesday.

(Edited by Zinnia Ray Chaudhuri)