Earlier this week, IndusInd Bank disclosed an accounting discrepancy with an estimated impact of 2.35 per cent of the bank’s net worth. Soon after the disclosure, IndusInd Bank’s share price crashed by over 27 per cent in one day. The bank’s stock shed as much as 38 per cent market cap in six sessions.
Based on the disclosures available in the public domain, the bank has engaged an external audit team to comprehensively review its current systems and assess and account for the actual impact expeditiously, RBI said in a statement.
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“Reserve Bank has directed the Board and the management to have the remedial action completed fully during the current quarter viz., Q4FY25, after making required disclosures to all stakeholders,” said the central bank.
The statement said that depositors need not react to the speculative reports at this juncture. The central bank assured customers and investors that the bank’s financial health remains stable and is being monitored closely by it.
The bank’s auditor-reviewed financial results for the December quarter show that it has maintained a comfortable Capital Adequacy Ratio of 16.46 per cent and Provision Coverage Ratio of 70.20 per cent. The Liquidity Coverage Ratio (LCR) was 113 per cent as of March 9, 2025, as against the requirement of 100 per cent.
Also Read: IndusInd Bank fallout compels RBI to begin industry-wide review of derivative books
IndusInd Bank’s accounting lapse
IndusInd Bank had informed 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.
IndusInd Bank in an exchange filing, pointed out some discrepancies which were observed during the internal review of processes relating to Other Asset and Other Liability accounts of the derivative portfolio, post implementation of RBI Master Direction – Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 issued in September 2023, including accounting of Derivatives, applicable from April 01, 2024.
The leading private bank undertook internal trades that had low liquidity and were on a swap basis, where 3-5 yen deposits were to be swapped for 8-10 year dollars for a multilateral. These trades were hedged where the hedges were marked to the market, but the internal swaps were on a cost-accounting basis and not marked to be marketed. This resulted in discrepancies.
Also Read: IndusInd Bank share price extends crash; banking stock sheds 38% market cap in six straight sessions
The bank has also appointed an external agency to independently review and validate the internal findings. The review is likely to be completed by the fourth quarter itself. Earlier this month, IndusInd Bank’s CEO, Sumant Kathpalia, received RBI approval for a tenure extension of one year instead of the expected three years. On January 18, the CFO resigned to pursue other opportunities.
