IndusInd Bank shares crack 6% on MFI portfolio discrepancy, stage recovery

IndusInd Bank Ltd cracked 6 per cent in at the opening bell on Friday, but soon recovered despite concerns over the private lender's MFI portfolio. The stock hit a low of Rs 735.95, down 5.68 per cent. It later recovered and was quoting at Rs 768.85, down 1.47 per cent.

The bank is under fresh scrutiny following the disclosure of Rs 674 crore accounting discrepancy related to its microfinance (MFI) portfolio. This development follows a previous Rs 1,960 crore discrepancy in the bank’s derivatives portfolio.

On April 22, the bank had announced that its Internal Audit Department (IAD) was reviewing its MFI business after certain concerns were brought to management's attention. In a subsequent update on May 8, IndusInd Bank stated that the IAD had submitted its findings, revealing that Rs 674 crore had been incorrectly recorded as interest income over three quarters of FY24–25. The misstatement has since been fully reversed as of January 10, 2025.

These revelations come amid broader challenges for the private lender. IndusInd Bank has seen its market value decline by 45 per cent over the past year. Adding to investor concerns, CEO Sumant Kathpalia and Deputy CEO Arun Khurana recently resigned. In response, the Reserve Bank of India has formed a committee of senior executives — including Head of Consumer Banking Soumitra Sen and Chief Administrative Officer Anil Rao — to manage day-to-day operations, under the oversight of the board’s special committee.

In a separate development, the bank confirmed that the IAD was asked by the audit committee to investigate transactions recorded under “other assets” and “other liabilities” following a whistleblower complaint. According to the bank’s statement on Thursday, the audit identified unsubstantiated balances totaling Rs 595 crore in “other assets,” which were offset against corresponding entries in “other liabilities” in January 2025.

The IAD has also reviewed the involvement of key personnel in relation to these discrepancies. The board has committed to strengthening internal controls and ensuring accountability, stating:

“The board is taking necessary steps to reinforce internal governance, determine responsibility for these lapses, and take appropriate action.”

Earlier disclosures from the bank attributed the derivatives portfolio discrepancies to the incorrect accounting of internal derivative transactions, particularly those involving early termination. These errors had resulted in the recognition of notional profits, which were ultimately identified as the root cause of the irregularities.