IndusInd Bank's Damage Control After Rs 2,100 Crore Accounting Lapse
IndusInd Bank grapples with a significant accounting lapse of Rs 2,100 crore in its derivatives portfolio. CEO Sumant Kathpalia addresses the issue, but shares plummet despite assurances.
IndusInd Bank’s Damage Control After Rs 2,100 Crore Accounting Lapse
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IndusInd Bank is navigating a major financial setback after disclosing a substantial accounting discrepancy amounting to Rs 2,100 crore within its derivatives portfolio. Despite undergoing multiple audits—internal, statutory, compliance, and oversight by the RBI—the discrepancy went undetected until recently.
CEO and Managing Director of IndusInd Bank, Sumant Kathpalia, revealed that the bank first noted the accounting lapse between September and October last year. The initial disclosure to the RBI was made just last week, with a final report expected from an external agency by early April to ascertain the full extent of the discrepancy.
In a regulatory filing on Monday, IndusInd Bank reported that the discrepancy could potentially impact approximately 2.35 percent of the bank’s net worth as of December 2024, based on internal assessments. Analysts estimate the discrepancy at Rs 2,100 crore in absolute terms.
To address the issue transparently, the bank has engaged an external agency to independently review and validate its internal findings. Despite the financial setback, CEO Sumant Kathpalia assured stakeholders that the bank’s profitability and capital adequacy remain robust enough to absorb this one-time impact.
However, investor confidence was significantly shaken, leading to a sharp decline in IndusInd Bank’s stock price. Shares plummeted by 27.17 percent to close at Rs 655.95 on the BSE, marking a 1-year low and reflecting a 28 percent drop from the previous day’s closing.
During an analyst call, Kathpalia attributed the accumulation of discrepancies over 5-7 years prior to April 1, 2024, to ongoing operations in the derivatives portfolio. The bank initiated a review of its internal trade practices following RBI directives in September 2023, which mandated the discontinuation of internal derivative trading by April 2024.
Regarding his tenure, Kathpalia acknowledged that the discrepancy could impact his re-appointment as MD & CEO, given the RBI’s recent decision to extend his term by only one year instead of the proposed three years by the bank’s board. He emphasized the importance of maintaining operational continuity and growth despite the current challenges.
The unfolding situation at IndusInd Bank underscores a critical test for its leadership and operational resilience, as stakeholders await further clarity on the impact and remedial measures.
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Last Updated on: Wednesday, March 12, 2025 9:12 pm by Rahul Choursia | Published by: Rahul Choursia on Wednesday, March 12, 2025 9:12 pm | News Categories: BUSINESS
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