IndusInd Bank Moves to Fix Accountability After Independent Probe Reveals ₹1,959 Crore Accounting Impact
IndusInd Bank announced on Sunday that its board is taking “necessary steps” to ensure accountability of those responsible for the recent accounting lapses.
This decision follows the submission of an independent firm’s audit report to the bank on 26 April.
According to a regulatory filing, “The independent firm has determined a cumulative adverse accounting impact on P&L at Rs 1,959.98 crores as on 31 March 2025, which is similar to the amount disclosed on 15th April 2025.”
The bank stated that the financial statements for FY 2024-25 will appropriately reflect the impact of the discrepancies, and internal controls will be strengthened accordingly.
The filing further revealed that internal derivative trades have been discontinued from 1st April 2024.
“The independent report identifies incorrect accounting of internal derivative trades, especially in case of early termination, which resulted in the recording of notional profits, as the principal root cause for accounting discrepancy,” the bank added.
Financial Impact and Immediate Measures
Earlier disclosures by IndusInd Bank indicated that the accounting lapses would adversely impact the bank’s net worth by Rs 1,979 crore.
The bank assessed a post-tax adverse effect of 2.27 per cent on its net worth as of December 2024 due to discrepancies related to derivative deals.
Last month, the lender had reported that these accounting lapses could have an adverse impact of around 2.35 per cent of its net worth as of December 2024. Shares of IndusInd Bank have remained under market focus since the disclosure.
The independent report confirmed that incorrect accounting of internal derivative trades, particularly upon early termination, led to the recording of notional profits, causing the discrepancies.
An independent professional firm was engaged to conduct a thorough investigation, reviewing the roles and actions of key employees.
“The board is taking necessary steps to ensure accountability for those responsible for the lapses and is realigning the roles and responsibilities of senior management,” the bank stated.
Strengthening Controls and Market Reaction
The investigation report, submitted on 26 April 2025, estimated the cumulative adverse accounting impact at Rs 1,959.98 crore, matching the earlier disclosed figure.
IndusInd Bank confirmed that these discrepancies would be reflected in the FY 2024-25 financial statements.
In addition, measures will be taken to reinforce internal control mechanisms. The bank had already ceased internal derivative trading from 1st April 2024.
In the market, IndusInd Bank shares had hit a 52-week low of Rs 605.40 on March 12 but later recovered. Over the past month, the stock has risen by 26 per cent, reducing its one-year loss to 44.86 per cent.
Clarifications on MFI Business and Audit Involvement
Recently, IndusInd Bank came into the spotlight again after it announced a review of its Microfinance Institution (MFI) business. This move was aimed at addressing “certain concerns” that had come to the bank’s attention.
Amid speculation, the bank clarified that Ernst & Young (EY) was not engaged for a forensic audit, countering some media reports.
Instead, the bank explained that EY was supporting the finalisation of accounts as part of the Internal Audit Department’s routine procedures.
Based on findings from an external agency, IndusInd Bank reiterated the post-tax adverse impact of 2.27 per cent on its net worth, aligning with earlier internal estimates suggesting an approximate adverse impact of 2.35 per cent as of December 2024.
RBI’s Assurance and CEO’s Tenure Update
Amid these developments, the Reserve Bank of India (RBI) assured the public about the financial soundness of IndusInd Bank.
In a statement dated 15 March, the RBI said the bank’s financial position remains stable and urged depositors not to be swayed by speculative reports.
In a related move, the RBI approved only a one-year extension for the tenure of IndusInd Bank’s CEO, as opposed to the initially proposed three-year term.
Commenting on the developments, Macquarie noted, “Focus now shifts to the forensic audit report due from another external agency, where the objective is to determine the root cause and accounting implications of the discrepancies.”
IndusInd Bank reaffirmed its commitment to fixing accountability and restructuring senior management roles, following the confirmation of incorrect accounting practices in the independent audit report.
“The Firm (independent audit firm) has determined cumulative adverse accounting impact on P&L at INR 1,959.98 crores as on 31st March 2025, which is similar to the amount disclosed on 15th April 2025.
The Bank will appropriately reflect the resultant impact of the accounting discrepancies in the financial statements for FY 2024-25 and take measures to strengthen internal controls accordingly.
The Bank has already discontinued internal derivative trades from 1st April 2024. 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.
The Report also examined the roles and actions of key employees in this context. The Board is taking necessary steps to fix accountability of the persons responsible for these lapses and re-align roles and responsibilities of senior management,” the filing read.
