IndusInd Bank CEO Resigns Amid Financial Scandal

In a shocking turn of events, Sumant Kathpalia, the managing director and CEO of IndusInd Bank, has resigned with immediate effect. This decision comes in the wake of a massive accounting lapse in the bank's derivatives portfolio, amounting to nearly Rs 1,960 crore.

Kathpalia's resignation letter highlighted his acceptance of moral responsibility for the oversight, stating, "I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice." This marks a significant leadership change, following the recent departures of deputy CEO Arun Khurana and CFO Govind Jain.

Investigation Unveils Accounting Irregularities

An independent probe initiated on March 20 revealed that the irregularities were due to the misaccounting of internal derivative trades. Notably, early termination cases saw notional profits being incorrectly booked, leading to a substantial adverse impact on the bank's profit and loss account.

The bank's board has taken swift action, seeking RBI approval for a temporary 'committee of executives' to oversee the CEO's responsibilities until a permanent replacement is found. Additionally, all internal derivative trading has been suspended since April 1, 2024, in compliance with RBI directives.

Financial and Operational Repercussions

The scandal is expected to significantly affect the bank's net worth, with an estimated 2.27% dent as of December 2024. The board is now focused on reorganizing senior management roles and enforcing stricter accountability measures to prevent future discrepancies.

With the bank's fourth-quarter results pending, stakeholders are bracing for potential declines in net profits or substantial losses, underscoring the gravity of the situation.