Accounting Lapses Lead to Significant Financial Impact

IndusInd Bank announced on Tuesday that accounting discrepancies in its derivative portfolio would negatively affect its net worth by Rs 1,979 crore. This represents a 2.27% adverse impact on the bank's net worth as of December 2024.

External Review and Remedial Actions

Following the discovery of these lapses, the bank engaged PwC to evaluate the situation. PwC's report quantified the financial impact and recommended steps to strengthen internal controls over derivative accounting operations. The bank plans to reflect these adjustments in its 2024-25 financial statements.

Forensic Audit to Uncover Root Causes

In addition, the bank's board has commissioned Grant Thornton to conduct a forensic audit. This audit aims to identify the root causes of the discrepancies and assess the accuracy of the accounting treatment of derivative contracts under current standards.

Promoter Support Amidst Financial Strain

IndusInd International Holdings Ltd (IIHL), the bank's Mauritius-based promoter, has pledged to inject capital if needed. IIHL, part of the Hinduja Group, recently received RBI approval to increase its stake in the bank from 16% to 26%.

Regulatory Perspective on Banking Sector Health

Reserve Bank Governor Sanjay Malhotra commented on the incident, describing it as an "episode" rather than a systemic failure. He emphasized the overall robustness of the banking system, despite occasional issues in a sector as vast as India's.