Major Accounting Discrepancy Shakes Investor Confidence
IndusInd Bank is facing intense regulatory scrutiny after it revealed major discrepancies in its derivative accounting. On March 10, 2025, the bank made a shocking disclosure—admitting accounting errors in its forex derivative transactions dating back 5 to 7 years.
These errors have had a serious financial impact. According to the bank’s estimates, the discrepancies resulted in an adverse impact of nearly 2.35% on its net worth, as of December 2024. The revelation has sent ripples across the banking industry and raised serious concerns about regulatory compliance and governance practices.
RBI, SEBI, and ICAI Take Swift Action
RBI Launches Sector-Wide Derivative Review
The Reserve Bank of India (RBI) quickly initiated an industry-wide review of derivative exposures across both public and private sector banks. The aim is to evaluate regulatory compliance and determine whether similar lapses exist in other institutions. This proactive step by RBI highlights the seriousness of the matter and its potential impact on the financial system.
SEBI Acts Against Top Executives
Meanwhile, the Securities and Exchange Board of India (SEBI) has taken stringent action against key individuals. Former CEO Sumant Kathpalia, Deputy CEO Arun Khurana, and three other senior officials have been barred from trading in the securities market.
They are accused of insider trading—allegedly selling shares of the bank while possessing unpublished price-sensitive information. SEBI estimates that these trades helped the individuals avoid losses totaling nearly ₹20 crore (₹200 million).
ICAI’s Financial Reporting Review Begins
Adding to the regulatory clampdown, the Institute of Chartered Accountants of India (ICAI), through its Financial Reporting Review Board (FRRB), has begun a suo motu review of IndusInd Bank’s financial statements for the fiscal years 2023–24 and 2024–25.
ICAI President Charanjot Singh Nanda confirmed that this review will focus on evaluating the accuracy of financial disclosures and auditing practices followed by the bank’s auditors.
PwC Appointed for Forensic Audit
To dig deeper into the issue, IndusInd Bank has appointed PricewaterhouseCoopers (PwC) to conduct a comprehensive forensic audit of its derivative portfolio.
The audit will assess whether the accounting methods used were correct and identify any potential negligence or misreporting. The results of this audit are expected to be disclosed in the bank’s upcoming financial statements and may further determine legal or disciplinary action.
Stock Market Reacts to Crisis
The market’s reaction was immediate and severe. IndusInd Bank’s share price dropped over 31%, highlighting the erosion of investor trust. The significant loss in market value reflects growing concerns over the bank’s internal controls and long-term stability.
Long-Term Impact and Industry Implications
The outcome of ongoing audits and investigations is expected to shape future regulations on derivative accounting and corporate transparency. Financial institutions across India will likely face more stringent checks, ensuring that such lapses are not repeated.
Investors, regulators, and the general public are closely watching how the situation unfolds, particularly in terms of accountability, compliance, and governance at IndusInd Bank.
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