IndusInd Bank Appoints Independent Firm To Probe Derivative Portfolio Discrepancies

IndusInd Bank Ltd. said on Thursday that it's board has appointed an independent professional firm to investigate discrepancies in its derivative portfolio.

In a statement to the exchanges late evening, the lender said that this independent firm will conduct a comprehensive investigation to identify the root cause of the recently disclosed accounting discrepancies. This firm will assess the correctness and impact of the accounting treatment of the derivative contracts with regard to the prevailing accounting standards.

The firm will also provide guidance, identify any lapses and establish accountability in relation to the above-mentioned discrepancies.

The announcement came after the bank disclosed on March 10, that it had discovered certain discrepancies in its derivatives portfolio. The bank had estimated a financial impact, which is the equivalent of 2.35% of the bank's net worth as of December 31. This amounts to Rs 1,500-2,000 crore.

At the time, the bank had also said that an external agency was validating the findings of the bank's internal review. NDTV Profit had reported that the external agency appointed was PwC. Since then, the bank has faced considerable critcism and questions regarding the so-called discrepancies.

NDTV Profit had previously reported that even Reserve Bank of India had taken note of the situation and concucted checks across the banking system to ensure that other lenders are not facing similar issues. Sources had told NDTV Profit then that while the regulator is seeking clarifications from lenders, it looks like this issue was local to IndusInd Bank.

Sources had also told NDTV Profit that the issue facing IndusInd Bank was not one involving the derivatives portfolio, but poor accounting at the bank.

While addressing the press this week, IndusInd Bank promoter Ashok P Hinduja had said that the bank's board would take further calls on what action needs to be taken. At the time, Hinduja had said that this would depend on what the PwC report would say.

With a fresh independent audit, the process will likely take even longer. On March 7, RBI gave only a one year term extension to the bank's MD & CEO Sumant Kathpalia, even though the board sought three years.