IndusInd Bank faces accounting discrepancies, potential RBI intervention, and senior public sector banker appointment amid governance issues.
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With a series of accounting discrepancies coming to light in IndusInd Bank’s derivatives and microfinance institution portfolio in the last couple of months, the Reserve Bank of India (RBI) may appoint an additional director on the bank’s board to reinforce governance and accountability in the bank.
The central bank’s copybook to deal with cases such as serious governance issues and decline in the financial position at Yes Bank in 2020, prominent shareholders’ asserting their right to nominate their representatives on the Board at Dhanlaxmi Bank in 2020, sudden exit of MD & CEO at RBL Bank in 2021, and top level transition at Bandhan Bank in 2024 suggests that it is likely to appoint additional director(s) on the board of IIB too, said sources versed with developments on the regulatory front.
Given the accounting discrepancies that occurred under the current board’s watch at India’s fifth-largest private sector bank, the RBI may want to get its own additional director(s) in to get a handle on the affairs in the bank, they added.
An email to the RBI seeking confirmation about the possibility of the appointment of additional director(s) at IIB remained unanswered at press time.
With “accounting discrepancy” related skeletons tumbling out of the bank’s closet, the possibility of RBI preferring a senior public sector banker to helm it now increases.
Currently, six private sector banks are headed by those who held senior/top positions in public sector banks. The six banks are — YES Bank (Prashant Kumar, former Deputy Managing Director/DMD, SBI), Karur Vysya Bank (B Ramesh Babu, former DMD, SBI), RBL (R Subramaniakumar, MD & CEO, Indian Overseas Bank), Tamilnad Mercantile Bank (Salee Sukumaran Nair, former DMD, SBI), Jammu and Kashmir Bank (Amitava Chatterjee, former DMD, SBI), Bandhan Bank (Partha Pratim Sengupta, former DMD, SBI and MD & CEO, Indian Overseas Bank) and Ujjivan Small Finance Bank (Sanjeev Nautiyal, former DMD, SBI).
Pending appointment of a new MD & CEO at IIB in place of Sumant Kathpalia, who resigned on April 29, owning moral responsibility “given the various acts of commission/ omission that have been brought to his notice,” the bank constituted a “Committee of Executives” to discharge the duties, roles and responsibilities of the CEO.
IIB Deputy CEO Arun Khurana put in his papers a day before Kathpalia resigned. These high profile exits came after the bank, on March 10, disclosed that it noted some discrepancies in the account balances relating to Other Asset and Other Liability accounts of the derivative portfolio.
The bank’s detailed internal review then estimated an adverse impact of approximately ₹1,530 crore or 2.35 per cent of its net worth of ₹65,102 crore as of December 2024 due to the aforementioned discrepancies. A recent report by an external agency quantified the negative impact as of 30th June 2024 at ₹1,979 crore.
IIB on Thursday disclosed that a cumulative amount of ₹674 crore was incorrectly recorded as interest over three quarters of FY25 in its microfinance institution (MFI) business and that there were unsubstantiated balances aggregating to ₹595 crores in its “other assets” accounts.
The aforementioned disclosures were made following the bank’s Internal Audit Department (IAD) submitting its report on May 8, 2025.
The bank, in a regulatory filing, said the amount (₹674 crores), which was incorrectly recorded as interest over three quarters of FY25 in its MFI business, was fully reversed as on January 10, 2025.
Further, the unsubstantiated balances aggregating to ₹595 crore in “other assets” accounts of the bank were set off against corresponding balances appearing in “other liabilities” accounts in January 2025.
IIB noted that IAD has also examined the roles and actions of key employees in this context.
Published on May 16, 2025
