IndusInd Bank Board Suspects Fraud Involving Top Employees
IndusInd Bank stated that the Internal Audit Department submitted a report on May 20, where one of the largest adjustments involved the write-off of Rs 1,960 crore of notional profits from internal trades, accumulated since FY16.
MUMBAI: The board of IndusInd Bank Ltd suspects senior employees in critical accounting and financial reporting functions were involved in perpetrating fraud against the Bank. The Board has escalated the matter to regulatory authorities and investigative agencies, and fix accountability of all persons responsible for these lapses, said the lender on Wednesday.
According to the bank’s audited financial statements and internal audit reports, the issues stem from incorrect accounting of internal derivative trades, artificially inflated fee and interest income from its microfinance portfolio, and unsubstantiated entries in “Other Assets” and “Other Liabilities” accounts.
IndusInd Bank stated that the Internal Audit Department submitted a report on May 20, where one of the largest adjustments involved the write-off of Rs 1,960 crore of notional profits from internal trades, accumulated since FY16. The audit also uncovered incorrect booking of Rs 673.82 crore as interest income and Rs 172.58 crore as fee income in the microfinance business over three quarters, which was reversed in the fourth quarter of FY25. Additionally, another Rs 595 crore in
misclassified asset and liability entries was netted off in the books.
"Based on review of all these reports, the board suspects the occurrence of fraud against the bank and the involvement therein of certain employees having a significant role in the accounting and financial reporting of the bank," the statement from the bank said.
Speaking about appointment of a new CEO, the lender said that its Board had started the process for identifying potential CEO candidates
and is making speedy progress.
“The RBI has advised the Bank to submit proposals for appointment of the new CEO for RBI’s approval by June 30, 2025. The Board is at an advanced stage in the selection process and is confident that recommendations will be submitted to the RBI well in advance of the timeline.”
In the interim, the Committee of Executives (CoE), with members having over 30 years of experience individually, is entrusted to oversee the operations of the Bank under the guidance of an Oversight Committee of the Board.
IndusInd Bank reported a net loss of Rs 2,328 crore for the January-March period compared to a net profit of Rs 2,349.15 crore in Q4 FY24. This is the first instance in 20 years that IndusInd Bank has reported a quarterly net loss.
The sharp decline in profit is due to higher provisioning (Rs2,522 crore) and reduced interest income (down 13 per cent YoY). For FY25, net profit plunged 71 per cent to Rs2,576 crore, with annual provisions soaring to Rs 7,136 crore. The bank has been hit by accounting lapses, fraud in its microfinance and derivatives portfolios leading to a forensic probe and top-level resignations, including CEO Sumant Kathpalia and Deputy CEO Arun Khurana. External auditor PwC flagged a Rs 1,979 crore impact from these lapses.
