IndusInd Bank to Conduct Independent Probe into Derivatives Discrepancies
IndusInd Bank has stated that it will engage an independent professional firm to look into the gaps in its derivative portfolio. This inquiry will attempt to establish where the discrepancies stem from, analyze whether the accounting treatment provided is correct, and confirm if there are any violations of provisions of accounting standards.
The bank said in an exchange filing that its Board of Directors during a meeting on Thursday commenced a “gaps assessment” investigation. The goal is to ascertain what, if any, failures took place and who is to be held responsible regarding the accounting manipulations of these derivative contracts. The results from this probe will enable the bank to ascertain what actions to undertake next.
The matter became known on March 10, when IndusInd Bank acknowledged there were errors in reporting some derivative transactions done in the last five to seven years. These transactions were predominantly done to mitigate the risk of foreign currency-denominated loans.
To add to the troubles, the Reserve Bank of India (RBI) also extended the tenure of the bank’s Managing Director & CEO for one year instead of the three years he was initially recommended to be appointed for by the board. The resignation of the bank’s Chief Financial Officer (CFO) has further raised governance-related concerns.
On the asset quality front, IndusInd Bank faces challenges due to slowing economic growth and rising retail debt levels. The bank’s gross non-performing loan (NPL) ratio climbed to 2.3% by December 2024, compared to 1.9% in March 2024. The microfinance and credit card segments have experienced the most stress, according to a report.
The bank aims to address these concerns proactively and restore investor confidence through the upcoming investigation. The findings will be crucial in determining corrective actions and reinforcing governance standards.
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