The banking sector, already struggling to attract deposits, will likely face even more significant challenges following IndusInd Bank's revelation of accounting discrepancies related to foreign exchange or forex derivatives, which could result in a significant one-time loss in earnings. Senior bankers told Moneycontrol that the crisis at IndusInd Bank has raised fresh concerns within the industry, especially regarding deposit mobilisation. They noted that such incidents shake confidence among both depositors and investors.

“As such, there is quite a fight for deposits in the market and with the IndusInd Bank issue playing out, we fear the fight is only going to intensify,” a senior executive of a private bank said. A CEO of another private bank, who wished to remain anonymous, drew parallels between the IndusInd Bank issue and the Yes Bank crisis, noting that while the scale is different, the timing of the two incidents shares some similarities.

For banks, January-March is usually a busy time for collecting deposits. "Developments at IndusInd Bank are surfacing just when an all-out war for deposits is being rolled out. This will particularly have an impact in garnering large-sized deposits, mainly those above Rs 3 lakh, from a retail perspective," expressed a CEO.

On the morning of March 11, the BSE Private Bank Index dropped by 1.32 per cent, mainly due to a sharp 22 per cent fall in IndusInd Bank. Other smaller banks, including City Union Bank, Bandhan Bank, and AU Small Finance Bank, also saw up to 4 per cent declines. In the third quarter of this financial year, deposit growth for both private and state-owned banks ranged between 4 and 23 per cent. Some brokerages noted that deposit collection this year has been better than the previous year, except for September and November 2024, when banks faced challenges in attracting deposits. As a result, the credit-deposit ratio for private banks remains above 80 per cent, with HDFC Bank reaching 100 per cent in the third quarter. This has raised concerns for regulators, prompting the central bank to warn banks about the importance of deposit mobilisation repeatedly.

In light of the IndusInd Bank crisis, banking deposit figures for March will be closely monitored. On March 10, IndusInd Bank disclosed in an exchange filing that an internal review of its derivative portfolio revealed a potential 2.35 per cent reduction in its net worth, around ₹62,000 crore as of March 31, 2024. This review followed RBI’s September 2023 directive on banks' investment portfolios. CEO Sumant Kathpalia acknowledged discrepancies in account balances during a late evening conference call but did not specify how they were identified. The bank is awaiting a final report from an external agency, after which it will assess the financial impact. By 11:49 AM, IndusInd Bank’s stock had fallen 23 per cent from the previous close, trading at ₹693.30 on the National Stock Exchange.