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IndusInd Bank Revamps Top Leadership Following ₹2,100 Crore Accounting Fault

Prime Highlights: 

  • IndusInd Bank is revamping top leadership following an accounting error that has been put at ₹2,100 crore. 
  • The affair pertains to internal currency derivative trades over half a decade back. 

Key Facts: 

  • The Reserve Bank of India (RBI) has officially lost faith in key managers and proposed leadership shuffles. 
  • Shares of the bank have faced a steep plunge of more than 30% since the expose. 
  • The shortfall could affect around 2.35% of the bank’s net worth as of December 2024. 

Key Background: 

IndusInd Bank, a top private sector bank in India, is reeling from a severe governance and financial crisis following the discovery of a ₹2,100 crore ($230 million) accounting shortfall. The cause lies in internal currency derivatives trades that were not marked to market correctly, which went undetected for more than six years. While a number of internal and external audits were conducted during this time, the issue only emerged when a steep decline in the rupee revealed the concealed losses. 

Following the revelation, IndusInd Bank has begun a realignment of senior management positions to deal with lapses in accountability. The board is reviewing internal reports and external audit reports and has hired external investigators to probe further. In addition, the bank has also decided to suspend all internal derivative trading from April. 

There are indications that the RBI has been unhappy with the leadership of the bank, suggesting the eventual replacement of CEO Sumant Kathpalia and Deputy CEO Arun Khurana. IndusInd Bank, however, has officially denied reports of their imminent exit, terming such reports factually incorrect. 

Adding to the turmoil, India’s securities regulator, SEBI, is probing potential insider trading deals by five top bank officers who are believed to have been privy to unpublished sensitive information regarding the accounting discrepancies. While these probes and the share price plunge were unfolding, regulators had assured that IndusInd Bank is still well-capitalized. 

The Hinduja Group, the largest shareholder in the bank, has reaffirmed its pledge to infuse further capital support if necessary. IndusInd Bank will announce its annual results by mid-May, and the stakeholders will be keenly watching how the bank navigates the impact of the crisis while restoring credibility and stability in its operations.