IndusInd Bank Sees New Accounting Issue Emerge In Microfinance Business

Private sector lender IndusInd Bank Ltd. on Monday disclosed that it has detected "certain concerns" in its microfinance portfolio and that an internal audit is underway.

"As a part of the process of finalization of accounts, the Bank’s Internal Audit Department (IAD) is conducting a review of the Bank’s MFI business, to examine certain concerns which have been brought to the Bank’s attention," IndusInd Bank told exchanges.

Big four consulting firm EY is currently assisting the internal audit department in this review. However, EY has not been tasked with conducting a forensic audit of the bank's microfinance bank, the lender clarified.

The Economic Times first reported that EY was appointed to audit the bank's microfinance book, in connection with issues relating to interest accruals. The issues had led to an accounting discrepancy worth Rs 600 crore, the report said.

This comes close to recent disclosures by IndusInd Bank, which had detected accounting discrepancies in its derivatives book as well. Last month, the bank disclosed that it had identified this discrepancy and that it had estimated a financial hit ranging between Rs 1,500-2,000 crore. On April 15, the bank said that an external review had confirmed that the financial hit owing to the derivatives discrepancies amounted to Rs 1,979 crore.

The Reserve Bank of India has already curtailed Managing Director and Chief Executive Officer Sumant Kathpalia's tenure to March 2026, despite the board of the bank seeking a three year extension this year. NDTV Profit had previously reported that the bank's board is expected to submit potential successor names to the RBI by September or October.

IndusInd Bank's board has also appointed Grant Thornton to do a thorough review of the derivatives discrepancies, the report for which is expected to be submitted in the next few weeks. This review will also assign accountability on the people responsible for this discrepancy.

The RBI is awaiting the outcome of this review to take further action against the bank.

This is not the first time that the bank's microfinance book has been under the scanner. In 2021, IndusInd Bank revealed that a tech glitch had resulted in 84,000 new loan accounts being opened in the microfinance business, without adequate customer consent.

At that time, a whistleblower letter had also rocked IndusInd Bank, as allegations of compliance issues at the microfinance unit had been levelled.