IndusInd Bank Finds ₹15.3 Billion Hole In Derivatives Trade

IndusInd Bank today announced accounting discrepancies related to foreign exchange derivatives, with an adverse impact of approximately 2.35% of its net worth as of December 2024. A back-of-the-envelope calculation suggests a hit of around ₹15.3 billion, although the bank, in an analyst call, stated that the final numbers would emerge after an ongoing external review.

The bank expects the review to be completed before the end of the fourth quarter.

"The bank's profitability and capital adequacy remain healthy enough to absorb this one-time impact," it said in an exchange release. Later in the call, the bank clarified that the amount in question had been recorded as interest income in past quarters.

IndusInd Bank had reported a profit of ₹14.02 billion in the December quarter.

"I think general reserves cannot be touched, and I believe we will have to take it to the P&L. We are targeting closure in quarter four, but let's see if we get any dispensation. However, I would prefer to settle it in quarter four if possible," CEO Sumant Kathpalia said.

Regarding the possibility of the final discrepancy differing from the estimated figure, he stated:

"We have conducted all our due diligence before making this disclosure. It is an estimate for now, as the validation is still ongoing. Once the validation is complete, we will disclose the final number. In my view, the difference should not be significant."

The CEO said the issue, of which RBI was aware of, may have had bearing on his term being extended by just one year, not three, as recommended by the bank’s board. The short extension had led to a fall in price of the bank’s shares and a cut in its price targets by various brokerages.