- Wednesday, March 12, 2025
The discrepancy in IndusInd Bank’s treasury business went unnoticed despite multiple audits like that of internal, statutory, and compliance, as well as by the RBI
By: India Weekly
AFTER being hit by the fallout of a ₹21 billion (£185.76m) discrepancy in accounting, IndusInd Bank on Tuesday (11) tried to contain the damage by claiming it has enough reserves and capital to cover for it
IndusInd Bank CEO and managing director Sumant Kathpalia said that the accounting lapse was noted around September-October last year and the bank gave a preliminary update to the RBI about this last week.
The final number will be known after the external agency, which the bank has appointed, finalises its report by early April.
In a stock exchange filing, private sector lender IndusInd Bank on Monday (10) disclosed that the bank has noted some discrepancies in its derivatives portfolio which could have an adverse impact of about 2.35 per cent of the bank’s net worth as of December 2024 as per its internal review.
Analysts peg the discrepancy at ₹21 billion in absolute terms.
The bank has also appointed an external agency to independently review and validate the internal findings.
In an analyst call late on Monday (10) night, Kathpalia said that the discrepancy in the derivative portfolio has been accumulated in the book over a period of 5-7 years prior to April 1, 2024.
The discrepancy in IndusInd Bank’s treasury business went unnoticed despite multiple audits like that of internal, statutory, and compliance, as well as by the RBI.
He said the bank started reviewing its internal trade book after the RBI circular in September 2023 which mandated that internal trade in derivatives were to be discontinued from April 1, 2024.
“..We started observing discrepancies in our (derivatives) business in October, and then we hired external agency to review our business. That is why we are comfortable that by March end or early April, we (external agency report) should be able to identify the gaps,” Kathpalia said.
Kathpalia said that IndusInd Bank had given a “preliminary update” about this discrepancy to the banking regulator RBI last week.
Asked in the analyst call as to whether this discrepancy has had a bearing on his re-appointment as MD & CEO, Kathpalia said, “Of course this would have a bearing because they were aware of the issue”.
The RBI last week approved only one year extension to Kathpalia till March 23, 2026, as against three years proposed by the bank’s board.
“I don’t know what’s the rationale for them to give me 1 year. But I think they are uncomfortable with the way my leadership skills of running the bank is and we have to respect that. This is a litmus test for the bank, from a succession point we see how to take the bank forward,” Kathpalia said.
Shares of the bank nosedived 27 per cent on Tuesday (11) to close at ₹655.95 on the Bomba Stock Exchange.
On Wednesday (12) they remained steady and closed marginally higher at ₹684.70, according to Moneycontrol.com. (PTI)
