IndusInd Bank shares are set to gain attention on Wednesday following the resignation of its Managing Director and CEO, Sumant Kathpalia. This development marks a significant leadership change at India’s fifth-largest private lender.
Kathpalia resigned on Tuesday, shortly after Deputy CEO Arun Khurana left the company. Their departures occurred after revelations of accounting discrepancies in the bank’s derivatives portfolio.
These events followed an independent investigation conducted by a professional firm appointed by the bank’s board on March 20, 2025. The firm’s report, submitted on April 26, confirmed that incorrect accounting practices had adversely affected the bank’s profit and loss account by Rs 1,959.98 crore as of March 31, 2025.
In his resignation letter, Kathpalia expressed his intent to resign due to the ongoing discussions regarding derivatives. He stated that he took moral responsibility for the issues identified.
Additionally, the Reserve Bank of India (RBI) had decided in March to extend Kathpalia’s tenure by only one year, despite the bank’s request for a three-year extension. Concerns over governance and financial reporting influenced the RBI’s decision.
The issue came to light on March 10 when IndusInd Bank announced that mark-to-market (MTM) losses in its derivatives book could impact up to 2.35% of its net worth, amounting to nearly Rs 1,600 crore as of December 2024. The discrepancies were mainly due to incorrect accounting of internal derivative trades, particularly in cases of early termination, leading to notional profits and distorted financials.
As a preventive measure, the bank discontinued all internal derivative trading from April 1, 2024.
Following these revelations, the bank’s share price fell by nearly 25%, from Rs 900 to Rs 686 per share.
To further investigate, the bank engaged PwC to quantify the losses initially detected in October 2024. Subsequently, the Reserve Bank of India directed global audit firm Grant Thornton Bharat to conduct a forensic investigation for a thorough assessment of the losses.
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