Whalesbook
New Tax Scheme Aims to Boost Deposits
IndusInd Bank's new Capital Gains Account Scheme (CGAS) aims to attract and keep customer money by offering a tax-efficient option. This allows individuals to deposit funds from asset sales, deferring capital gains tax until they reinvest. However, the scheme launches as the bank and the sector face financial challenges.
Profit Drop and Valuation Concerns
IndusInd Bank's stock traded around ₹818-₹819 on March 25, 2026, showing recent volatility. The bank's market capitalization is about ₹63,800 crore. While the CGAS aims to attract new deposits, the stock's valuation is complex. IndusInd Bank has a negative Earnings Per Share (EPS) of -26.10, resulting in a trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio of roughly -31.35. This is a sharp contrast to a previous P/E ratio of 16.5, highlighting major earnings concerns for investors. The stock's recent performance has been mixed, gaining 2.63% on March 25th but declining 7.75% year-to-date and 2.88% in the last five days.
Sector Faces Deposit Shortage
India's banking sector faces a widening gap between credit growth and deposit growth. As of February 2026, credit expanded by 14.9% year-on-year, while deposits grew by 12.5%, pushing the Loan-to-Deposit Ratio (LDR) above 80%. This imbalance, along with a significant drop in Current Account Savings Account (CASA) ratios from 44.8% in FY22 to 37.9% in December 2025, is pressuring net interest margins (NIMs). Banks are increasingly relying on costlier wholesale funding and term deposits to bridge this gap.
CGAS Competition Heats Up
The CGAS has expanded significantly, with 19 private banks, including HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, now authorized to offer it since November 2025. This widens taxpayer access but also intensifies competition for these specific assets. IndusInd Bank offers a Type B term deposit starting at ₹10,000, while ICICI Bank requires ₹25,000 for its equivalent, creating a competitive difference. Digital payment methods like UPI, IMPS, and NEFT are used for CGAS deposits, reflecting broader financial service digitalization.
IndusInd Bank's Financial Risks
IndusInd Bank's current financial health shows notable risks. The bank has reported negative earnings for six consecutive quarters, with a PBT loss of ₹1,488.35 crore and a significant PAT decline of 88.5% in its most recent period. This ongoing profitability strain is reflected in its negative TTM EPS and P/E ratio, indicating the market's current valuation differs from traditional earnings multiples. Analyst sentiment is mixed, with many holding 'Sell' ratings despite some platforms recently upgrading the stock to 'Hold'. The bank's Book Value is ₹833, and the stock trades at about 0.98 times its book value, suggesting it might be valued below its net asset worth, typical for companies with weak earnings. High contingent liabilities of ₹14,36,530 crore and promoter holding at a low 15.4% also warrant caution.
Outlook for Banks and IndusInd
The banking sector is projected for advance growth of around 13% in FY26 and FY27, supported by expected policy rate cuts. However, a high LDR and the ongoing challenge of raising deposits will likely keep NIMs under pressure. Expanding CGAS across major banks signals greater customer convenience and compliance. IndusInd Bank's success with this scheme will depend on attracting assets despite its profit challenges and navigating the competitive banking environment, where deposit growth is critical and expensive.