IndusInd Bank has denied media reports claiming that the Reserve Bank of India (RBI) has urged its CEO and Deputy CEO to step down following significant accounting lapses. The bank strongly refuted the allegations, stating that the information circulating was factually incorrect and did not reflect the actual situation.

IndusInd Bank Issues Clarification

Amid growing speculation, IndusInd Bank released an official statement on March 21, dismissing reports about the imminent departure of its top executives.

“We would like to clarify that the recent media reports regarding the tenure of the Bank’s CEO and Deputy CEO are factually incorrect. The Bank strongly denies the claims made in these articles. The information circulating is entirely inaccurate and does not reflect the true situation,” an IndusInd Bank spokesperson said.

RBI Allegedly Seeks Leadership Change Over Accounting Lapses

Earlier in the day, a Reuters report citing sources claimed that the RBI had lost confidence in the bank’s top executives due to significant accounting lapses. According to the report:

The RBI has urged IndusInd Bank’s CEO and Deputy CEO to step down once replacements are found and approved.
The central bank wants an orderly leadership transition to prevent panic among depositors.
The RBI prefers external candidates to replace the current executives, despite recently approving a one-year extension for CEO Sumant Kathpalia.

While IndusInd Bank’s board is responsible for recommending senior leadership, the RBI’s final approval is mandatory. The central bank often advises struggling lenders to bring in external candidates when governance or financial concerns arise.

RBI Reassures Stakeholders on IndusInd Bank’s Stability

On March 15, the RBI issued a statement addressing concerns related to the accounting discrepancies at IndusInd Bank. The central bank assured the public that IndusInd Bank remains well-capitalized and financially stable.

Financial Indicators as of Q3 FY24:

Capital Adequacy Ratio (CAR): 16.46% (above regulatory requirements)
Provision Coverage Ratio (PCR): 70.20%
Liquidity Coverage Ratio (LCR): 113% (exceeding the mandatory 100% threshold)

The statement from the RBI aimed to calm market fears after reports of discrepancies in IndusInd Bank’s derivatives portfolio surfaced.

IndusInd Bank Faces Rs 2,000 Crore Loss Due to Derivatives Discrepancies

IndusInd Bank recently disclosed financial discrepancies in its currency derivatives portfolio, which could lead to a one-time loss of Rs 2,000 crore in the March quarter. The issue was identified during an internal review of its derivatives trading operations.

This revelation raised concerns about risk management practices within the bank, prompting regulatory scrutiny. However, the bank and the RBI have maintained that IndusInd’s financial health remains strong despite the setbacks.

Regulatory Oversight and Market Response

1. RBI’s Increasing Regulatory Vigilance

The RBI has tightened oversight on private banks, especially after governance issues surfaced in various financial institutions. Key trends include:

Greater scrutiny of risk management and financial reporting
Preference for external leadership changes in struggling banks
Frequent stress tests to ensure liquidity and stability

2. Investor Concerns Over Leadership Uncertainty

The speculation about top management changes at IndusInd Bank has unsettled investors, potentially impacting the bank’s stock performance in the near term. Clarity on leadership continuity and regulatory approvals will be crucial for stabilizing market sentiment.