" Your Bank is deeply committed to delivering sustainable value to
all its stakeholders, including customers, employees, and society at large. "
Dear Shareholders,
I am delighted to address you as we reflect upon the remarkable
performance of IndusInd Bank Limited and navigate through the ever-evolving economic
landscape. It is my privilege to present the annual report for FY2023.
A Dynamic Landscape
The global economic outlook remains both challenging and promising, as
we emerge from a tumultuous year. We have witnessed stronger-than-expected growth in
advanced economies despite multiple global shocks. Re-opening of the Chinese economy is
also expected to aid global recovery. However, we anticipate muted global economic
activity due to the lagged effects of last year's coordinated monetary tightening by
major global central banks led by the US Federal Reserve. Recent stress in the banking
sector of advanced economies is also likely to further tighten bank lending standards,
adversely impacting credit supply and overall growth. There are growing concerns in global
financial markets over governance, sustainable growth, stability of markets and rapid
technological evolution. Global regulators are closely monitoring the developments in
Generative Artificial Intelligence and Machine Learning and its use or misuse. This
mandates urgent reskilling of market players, regulators and policy makers. The extant
climate crises require significant investment in sustainable finance for mitigation,
adaptation and building resilience.
The extreme volatility of interest rates has a direct impact on
domestic markets and also leaves repercussions on international markets. Emergent risks
from crypto need global consensus on issues around property rights, custody, transfer, and
valuation. Apart from this, concerns also stand tall around the lack of regulatory
supervision and crypto insolvency, exponentially compounding risks for financial
regulators. These risks and fast emerging technological developments, including Artificial
Intelligence, defy sovereign boundaries and sectoral silos. Managing the growing milieu of
"Known Risks" in addition to potential cyber threats and more importantly the
new universal "Unknown Risks" requires an urgent need to forge a global
consensus and institutional cooperation that transcends geographical boundaries.
India's increasing global credibility and stature make it a
potential leader in establishing an international regulatory alliance to create a more
modern global regulatory framework that considers the interests of Emerging Economies and
the Global South. The opportunity presented by India's presidency of the G20 in 2023
allows for the building of consensus in a world currently marked by polarized divisions.
If successful, this initiative could have significant positive consequences on a global
scale.
Amidst the challenges, central banks and authorities have taken
decisive action to mitigate the impact on the broader financial system and emerging
economies. While global inflation is easing from its peak last year, core inflation
persists in several developed economies, nudging central banks to remain watchful. In
fact, inflation is projected to remain above targets in many countries throughout 2023 and
2024. Moreover, subdued demand and the shift from goods to services are dampening global
trade. Compounding these issues are protracted geopolitical tensions and divergent global
positions on multilateral matters, which increase the risks of geo-economic fragmentation
and impact international capital flows.
In this global backdrop, the Indian economy shines as a beacon of hope.
The real GDP growth is projected to be in the range of 6 to 6.5% this fiscal year,
contributing over 15% to global growth, according to the International Monetary Fund (IMF)
projections. Although growth in India is expected to be moderate compared to the previous
fiscal year's 7.2%, the impact of tighter financial conditions is expected to be felt
in the second half. Nevertheless, the ongoing recovery in the services sector, resurgence
in rural demand robust consumption outlook and improved conditions for capital formation
and investments from public and private sources, will support strong growth.
Looking Ahead with Confidence
While private consumption growth may witness a temporary weakness in
some sectors, we anticipate an overall sustained improvement in consumer sentiment due to
a steady pickup in employment and other macroeconomic factors. The strength of rural
consumption recovery hinges on the outcome of monsoons, which are predicted to be normal,
although some uncertainty remains due to El Nino. The easing of CPI inflation over the
year, to around 5% in FY2024 from 6.7% in FY2023, will provide support to consumption as
well. Government capital expenditure (CapEx) will play a critical role in driving capital
formation, with a substantial increase in budgeted capital spending during FY2024. The
moderation in commodity prices, the government's focus on CapEx, healthy balance
sheets of banks and corporates, and robust credit growth will foster private investment
activity. Encouragingly, RBI's enterprise surveys indicate higher investment
intentions of manufacturing companies during the year. The economic outlook for India is
promising, relative to most other leading economies.
Robust Performance
IndusInd Bank continues to deliver robust performance and this was seen
in outcomes of the recently concluded 3-year Planning Cycle 5 (PC-5 over FY2020-23). The
key balance sheet metrics in terms of capital adequacy, liquidity, retail deposit
mobilisation, provision coverages etc. are at their healthiest levels in the past several
years. Having achieved the balance sheet strengthening, the Bank cautiously moved on to
accelerating growth.
This is reflected in the Balance Sheet footage of 4,57,837 crores (14%
Y-o-Y growth), deposits of 3,36,120 crores (15% Y-o-Y increase) and loans of 2,89,924
crores (21% Y-o-Y increase) as of March 2023. As a consequence, the Bank's Total
Income stood at 44,541 crores, compared to 38,167 crores in the previous year. Operating
expenses were 11,346 crores, and Pre-Provision Operating Profit rose to 14,419 crores.
Net Profit soared to 7,443 crores (55% Y-o-Yincrease).
The Bank has now also announced a strategy for the next Planning Cycle
6 (PC-6) spanning FY2023-26. The PC-6 strategy is "Market Share with
Diversification" with a focus on Growth, Granularity and Governance. The strategy
will be executed through continuing Retailization of deposits, diversifying areas of
domain expertise, scaling sub-scale businesses, accelerating Digital initiatives and
delivering value to our esteemed customers, while continuously imbibing ESG principles in
the businesses. Bank believes the current operating environment is conducive to sturdy
growth and thus confident of achieving the ambitions laid out in the PC-6 strategy.
Resilience in the Face of Challenges
While we embrace the healthy growth outlook, we remain cognizant of the
persistent risks. Weak external demand, geo-economic fragmentation impacting trade and
capital flows, and protracted geopolitical tensions pose challenges. However, we believe
that the risks to growth are balanced, with strong domestic drivers sustaining growth
while a challenging global economic environment acts as a headwind.
Our macroeconomic stability, characterized by easing inflation,
manageable external financing requirements, strong external buRs. ers, including adequate
foreign exchange reserves, and a stable policy environment, provides a solid foundation to
complement our domestic growth impulses. In this dynamic environment, I take pride in
highlighting the resilience of IndusInd Bank.
A Better Future in Mind
IndusInd Bank is actively expanding its ESG impact throughout its
operations. We are proud to announce that IndusInd Bank has been recognized as the
‘Best Bank in India for ESG-FY2023' by Asiamoney for the second consecutive
year, afirming our commitment to sustainability and responsible banking practices. We have
embedded ESG principles throughout our business, launching products that promote
sustainability across sectors such as Retail Banking, Corporate Banking, CFD, Digital
Banking and Microfinance. With integrated ESG risk assessments and a board-approved policy
and governance system, we prioritize ethical practices and responsible lending while
monitoring exposure to high ESG risk industries.
IndusInd Bank is the sole Indian bank chosen for the TNFD (Task Force
on Nature-related Financial Disclosures) Pilot program, showcasing our dedication to
managing biodiversity-related risks. Our goal is to become a carbon-neutral Bank by 2032,
with all PIONEER branches now LEED certified. Inclusive practices extend beyond our
internal operations, as evidenced by the launch of all-women branches, the employment of
neurologically diverse individuals, and a board composition that promotes gender equality.
We ensure credibility and reliability in our sustainability reporting by aligning our
policies with the latest ESG trends and obtaining third-party assurance.
As we move forward, your Bank remains steadfastly dedicated to its core
values of trust, transparency and excellence. We are focused on continuously strengthening
our corporate governance practices, effectively managing risks, building the highest
levels of compliance, fair and ethical practices within the Bank. Given fast-evolving
market opportunities, risks and global technological changes, the Bank is fully prepared
to respond with alacrity and dexterity. We recognize the need to constantly reskill our
38,179 highly talented and enthusiastic employees who adroitly adapt to market changes. I
am delighted to say that your Bank was certified as a "Great Place to Work" by
the Great Place to Work Institute? a reputed global body involved in the assessment of
company culture and people practices across sectors and countries. We stay fully committed
to building an ethos that cherishes diversity, strong core values and integrity of
purpose.
Your Bank is deeply committed to delivering sustainable value to all
its stakeholders, including customers, employees, and society at large.
I extend my heartfelt gratitude to our esteemed shareholders, loyal
customers, dedicated employees, regulators and all supportive stakeholders for their
unwavering trust and support. Together, we shall navigate the fast-evolving landscape,
overcome challenges, and expeditiously seize new opportunities to drive the growth and
success of IndusInd Bank.
With warm regards,
Sunil Mehta
Chairman