IndusInd Bank CEO, deputy may have to exit after accounting lapses: Report

The Reserve Bank of India (RBI) has urged the CEO of IndusInd Bank and his deputy to step down after significant accounting lapses as soon as replacements are found, according to a Reuters report. 

The RBI made clear that it had lost confidence in the top executives, but that it wanted an orderly transition to avoid unnerving depositors. The central bank also made clear that it wanted the candidates to come from outside IndusInd, according to the report. 

Business Today was unable to verify the development independently. 

IndusInd Bank dismissed the claims as factually incorrect. “We would like to clarify that the recent media reports regarding the tenure of the bank’s CEO and Deputy CEO are factually incorrect. The bank strongly denies the claims made in these articles. The information circulating is entirely inaccurate and does not reflect the true situation,” the bank said in a statement.

The lender is under focus after its recent disclosure of a substantial accounting discrepancy stemming from an internal review of forex derivative transactions. The investigation uncovered an accounting mismatch totalling Rs 1,577 crore (post-tax), representing approximately 2.35% of the bank's net worth as of December 2024. 

In 2023, the Reserve Bank of India (RBI) issued new directives regarding banks' investment portfolios, which became effective on April 1, 2024. Previously, banks were allowed to conduct internal swaps on their asset liability management and treasury desks, exchanging one cash flow for another.  

If these swaps were terminated early, any profits made were accounted for, while losses were not recorded. However, IndusInd Bank miscalculated the hedging costs associated with foreign exchange transactions over the past five to seven years. A recent internal review revealed this oversight, resulting in an expected impact on the bank's net worth equivalent to 2.35% or approximately Rs 2,100 crore. 

Recently, RBI had said IndusInd Bank is well-capitalised and the financial position of the bank remains satisfactory. The bank had maintained a comfortable Capital Adequacy Ratio of 16.46 per cent and Provision Coverage Ratio of 70.20 per cent, as per auditor-reviewed financial results of the bank for the quarter ended December 31, 2024. 

Meanwhile, Ashok Hinduja, chairman of IndusInd International Holdings Ltd (IIHL), stated that if necessary, the promoters are willing to inject capital into IndusInd Bank. However, at the present time, the bank's capital adequacy level is satisfactory and there is no immediate requirement for additional funds. IIHL, which holds a 15% stake in IndusInd Bank, has not been approached by the bank for additional capital.