IndusInd Bank Board To Re-Align Top Management Roles For Accounting Lapses
An independent professional firm appointed by IndusInd Bank to investigate the accounting discrepancy has determined its impact to be of Rs 1,959.98 crore.
IndusInd Bank Ltd. on Sunday said it is taking necessary steps to "re-align roles and responsibilities of senior management", and fix accountability of the persons responsible for accounting lapses, after receiving a report from an independent professional firm.
The independent firm—reportedly Grant Thornton—examined the roles and actions of key employees in the context of the accounting discrepancy, which was first flagged by the private sector lender last month, according to an exchange filing.
The bank had, on March 20, appointed the firm to conduct a comprehensive investigation to identify the root cause of the discrepancies and identify lapses and establish accountability in this connection.
"The Firm has submitted its report to the Bank on 26th April 2025. The Firm has determined cumulative adverse accounting impact on P&L at Rs 1,959.98 crores as on 31st March 2025, which is similar to the amount disclosed on 15th April 2025," the exchange filing said. The identity of the independent firm was not disclosed in the filing.
Further, the bank said that it will appropriately reflect the resultant impact of the accounting discrepancies in the financial statements for the year ended March 31, 2025, and take measures to strengthen internal controls accordingly.
While the bank has already discontinued internal derivative trades from April 1, the report identifies incorrect accounting of internal derivative trades, especially in case of early termination, which resulted in recording of notional profits, as the principal root cause for accounting discrepancy.
On April 15, IndusInd Bank said that its discrepancies in accounts balances of its derivative portfolio will have a negative impact of Rs 1,979 crore as on June 2024, according to a report from an external agency tasked to probe the matter. The external agency was PwC.
The bank, after receiving report from the external agency, said the impact of the accounting lapse amounts to 2.27% of its net worth as of December 2024. This is compared to an internal review that had estimated an adverse impact of approximately 2.35%.
As of the end of December, the bank's net worth was Rs 65,102 crore.
Both these reports have come as IndusInd Bank's board has already approved relieving Arun Khurana from the additional responsibility of chief financial officer. In place of Khurana, the board approved the elevation of Santosh Kumar as the deputy CFO and special officer of finance and accounts, which cam into effect from April 18.
Khurana was given the additional charge of chief financial officer on January 21. Three days prior to this, he was appointed as the deputy chief executive officer and key managerial personnel of the bank.
On March 21, NDTV Profit had reported that IndusInd Bank's board will need to come up with replacements for Chief Executive Officer Sumant Kathpalia by October.
The bank's board will have to hire a headhunter to get potential CEO names, which it will then review and prepare a shortlist of. It is unclear if only external names will form part of the shortlist or if any internal candidates will be considered. As such, Deputy CEO Arun Khurana is also in charge of the treasury and finance functions at the bank, where the accounting discrepancies have been found.
In early March, RBI had approved the re-appointment of Kathpalia as the managing director and CEO of the bank for another year instead of a three-year term that IndusInd had applied for.
Meanwhile, IndusInd Bank on April 22 also disclosed that it has detected "certain concerns" in its microfinance portfolio and that an internal audit is underway.
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 loan book, the lender clarified.
