IndusInd Bank Says Mistakes In Derivatives Portfolio To Impact Bank's Net Worth By Rs 1,979 Crore

IndusInd Bank disclosed that a series of accounting discrepancies in its derivative portfolio will cut down its net worth by Rs 1,979 crore. According to the private lender’s regulatory filing on Tuesday, this post-tax impact translates to 2.27 per cent of its net worth as of December 2024.

The bank first flagged the issue in March, when it estimated the lapses could shave off about 2.35 per cent of its net worth. To assess the full extent of the damage, the bank brought in audit firm PwC, which has now quantified the financial impact as of June 30, 2024. The bank said it will reflect this impact in its financial results for FY25 and intends to strengthen internal controls governing its derivatives accounting operations, reported PTI.

Forensic Audit Launched, Promoters Step In

Taking the probe further, IndusInd Bank’s board has engaged Grant Thornton to carry out a forensic audit. The firm’s task is to conduct an in-depth examination to trace the origin of the discrepancies, determine the accuracy of the accounting treatment of derivative contracts, and verify compliance with applicable accounting norms. It will also be responsible for identifying process lapses and establishing accountability.

In the wake of the developments, IndusInd International Holdings Ltd (IIHL), the Mauritius-based promoter entity of the bank, has committed to providing capital support if needed. IIHL, the investment arm of the Hinduja Group, has also received the Reserve Bank of India’s in-principle approval to raise its stake in the bank from 16 per cent to 26 per cent.

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RBI Governor: ‘Episodes, Not Failures’

Commenting on the matter last week, Reserve Bank Governor Sanjay Malhotra described the incident as an “episode” rather than a systemic failure. Referring to both the IndusInd Bank case and the restrictions placed on New India Cooperative Bank, he said, “These are not even failures, they’re episodes. In such a large system with so many entities, these things will happen again.”

Malhotra stressed that the overall banking system remains sound. “The banking system remains safe, secure, and robust at a systemic level,” he said. Citing data from recent years, the Governor added that only about 70 out of 1,500 cooperative banks  faced issues in the past eight to nine years, underlining that this remained a relatively small share in the broader banking landscape.

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