The RBI has a strong track record of protecting depositors in times of financial stress. Whether it was YES Bank in 2020, RBL Bank in 2021, or historical crises such as the Global Trust Bank collapse in 2004 and ICICI Bank’s liquidity concerns post-Lehman in 2008, the central bank has always stepped in to ensure depositors’ interests remain secure. While some resolutions have taken longer—such as the PMC Bank crisis of 2019—the RBI has consistently acted to prevent depositors from losing their money. But the key to note here, as we show with data, is that IndusInd Bank is not in any crisis. What has happened is a one-off accounting lapse.
IndusInd Bank’s Financial Position
Despite recent setbacks, IndusInd Bank remains financially stable, with little reason for depositors to worry. The reported accounting discrepancies are estimated to impact approximately 2.35% of the bank’s net worth and are under review by external agencies. Even with a projected hit of ₹1,500 crore from these derivative transaction discrepancies, the bank told CNBC-TV18 in an interaction that it will remain profitable and well above the regulatory capital requirements.
Also Read: ‘No margin call yet, pockets are strong,’ IndusInd Bank promoter says after stock rout
IndusInd Bank reported a net profit of ₹1,402 crore in the third quarter of the current financial year, down 39% year-on-year due to higher provisions, particularly in the microfinance sector. The gross non-performing assets (NPA) ratio rose slightly to 2.25% from 2.11% in the previous quarter, with provisions increasing by 87% to ₹1,744 crore. Despite these challenges, the bank maintains a strong capital adequacy ratio and liquidity position, with Tier 1 capital (Core Equity Tier 1 Capital Funds) of 15.18% or ₹65,132 crore and total investments of ₹1.18 lakh crore across government securities, bonds, and money market instruments. Its liquidity coverage ratio stood at 118% as of December end, which, simply put, means that for every ₹100 of possible cash outflows (like withdrawals and payments due) in the next 30 days, the bank holds ₹118 in highly liquid assets. In other words, while investors may face stock price volatility, depositors’ funds remain secure.
RBI’s Proactive Measures in Past Banking Challenges
History shows that the RBI has never allowed a major bank failure to impact depositors. In 2004, when Global Trust Bank (GTB) collapsed due to mismanagement and exposure to the Ketan Parekh stock market scam, the RBI swiftly placed it under a moratorium to prevent a bank run. Within two days, the central bank orchestrated a merger with Oriental Bank of Commerce (OBC), ensuring that depositors retained full access to their funds.
During the 2008 global financial crisis, ICICI Bank faced a liquidity crunch as rumours spread about its financial stability. The RBI stepped in, issuing public statements to reassure depositors that the bank was well-capitalized and that the central bank would provide any necessary liquidity support. This intervention helped prevent panic withdrawals and stabilized the situation.
Similarly, in 2016, Axis Bank faced rumours about losing its banking license due to alleged irregularities. The RBI quickly refuted these claims, preventing unnecessary panic among depositors by publishing a notice on its website, simply stating, “The Reserve Bank of India today clarified that it has not initiated any action to cancel the banking licence of Axis Bank in the wake of certain allegations about some serious irregularities in transactions relating to deposit/exchange of Specified Bank Notes in a few branches of the bank. The clarification comes in the background of rumours in a segment of the media that the bank was likely to lose its banking licence.”
Also Read: Ashok Hinduja on IndusInd Bank’s stability, transparency concerns, and promoter support
In the case of Yes Bank in 2020, where governance and liquidity issues had led to severe financial distress, the RBI placed a temporary moratorium and swiftly executed a reconstruction plan with capital infusion from major banks, including the State Bank of India. This ensured that depositors’ funds remained secure, and the bank resumed full operations within a short time.
PMC Bank’s 2019 crisis, triggered by massive under-reported loans to HDIL, led the RBI to impose regulatory restrictions, initially capping withdrawals. The regulator later facilitated the merger of PMC Bank with Unity Small Finance Bank (USFB), ensuring that depositors eventually regained access to their funds. Although this resolution took longer than others, depositors were ultimately protected.
More recently, when RBL Bank faced uncertainty in 2021 following the exit of its CEO, the RBI appointed an additional director to its board, reinforcing stability and ensuring continued depositor confidence.
Protection through Deposit Insurance
Beyond RBI interventions, Indian depositors are further safeguarded by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the RBI. Under the DICGC insurance scheme, deposits up to ₹5 lakh per depositor per bank—including savings accounts, fixed deposits, current accounts, and recurring deposits—are fully insured. This measure serves as an additional layer of protection for depositors, even in the rare event of a bank failure.
Also Read: IndusInd Bank CEO assures Q4 profitability despite ₹1,520 crore treasury loss
Given the RBI’s track record in handling banking crises and IndusInd Bank’s continued financial stability, depositors have little reason to worry. While stock market volatility may affect investors, the bank’s fundamentals remain strong, and history suggests that the RBI will step in if necessary to prevent any risk to depositor funds.
