How derivative losses forced IndusInd Bank to declare first quarterly losses in 19 years

By | May 23, 2025

The Derivative Debacle

IndusInd Bank’s internal review revealed discrepancies in its derivative portfolio, estimating an adverse impact of approximately 2.35% of the bank’s net worth as of December 2024. The bank had engaged in internal derivative trades that were not marked-to-market, leading to concealed real-time losses. These practices artificially inflated the bank’s earnings over several years. Reuters+3The Indian Express+3mint+3Reuters

Additional Accounting Lapses

Beyond derivative losses, internal audits uncovered two significant accounting discrepancies:

These issues further eroded investor confidence and highlighted weaknesses in the bank’s internal controls. @EconomicTimes+4Reuters+4Reuters+4

Leadership Changes Amidst Crisis

In response to the financial irregularities, Managing Director and CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned in April 2025. Their departures signaled accountability and a commitment to restructuring the bank’s governance. The New Indian Express+4The Indian Express+4Wikipedia+4

Regulatory Scrutiny and Investigations

The Securities and Exchange Board of India (SEBI) initiated investigations into potential insider trading by six officials at IndusInd Bank. Additionally, the Reserve Bank of India (RBI) has been involved in overseeing the bank’s corrective measures and leadership restructuring. Reuters+2The Indian Express+2Wikipedia+2

Financial Impact and Recovery Efforts

The bank’s gross non-performing assets (NPAs) rose to 3.13% (₹11,046 crore) of gross advances as of March 2025, up from 1.92% (₹6,693 crore) in March 2024. Despite the setbacks, IndusInd Bank maintains a Capital Adequacy Ratio of 16.24%, a Provision Coverage Ratio of 70%, and a liquidity coverage ratio of 118%, indicating a stable financial foundation. The Indian ExpressThe New Indian Express

Promoter Ashok P. Hinduja has expressed unwavering support for the bank, stating that IndusInd International Holdings Ltd. is prepared to infuse additional equity if necessary to bolster the bank’s capital base. The New Indian Express

Looking Ahead

IndusInd Bank’s recent challenges underscore the critical importance of robust internal controls and transparent financial practices. As the bank navigates this period of restructuring and regulatory scrutiny, its commitment to rectifying past errors and strengthening governance will be pivotal in restoring stakeholder confidence and ensuring long-term stability.

Note: This article is based on information available as of May 23, 2025. For the most current updates, please refer to official communications from IndusInd Bank and regulatory authorities.