RBI Reaffirms Stability of IndusInd Bank Amid Accounting Discrepancies

The Reserve Bank of India in a move to allay concerns over the stability of IndusInd Bank, following the admission of accounting discrepancies,  reaffirmed that the bank is financially stable and well-capitalised.

In a statement, the RBI said there is no need for depositors to react to the speculative reports at this juncture. The central bank said IndusInd Bank’s Capital Adequacy Ratio of 16.46% and a Provision Coverage Ratio of 70.20%, as of December 2024, demonstrated strong financial position. Additionally, the Liquidity Coverage Ratio of the bank was at 113%, well over the regulatory requirement of 100%.

The accounting discrepancies relate to currency derivatives transactions, which have reportedly remained undetected for the past seven to eight years. An internal review conducted by IndusInd Bank estimated that these inconsistencies could reduce the bank's net worth by approximately 2.35%, translating to an impact of ₹15.30 billion.

These discrepancies came to light following an RBI circular issued in September 2023, prompting a comprehensive review of the bank's investment portfolio. In response, IndusInd Bank's management acknowledged the issue and has engaged an external audit team to conduct an in-depth assessment. The RBI has directed the bank's Board and management to complete all remedial actions within the current quarter and ensure full disclosure to stakeholders.

To independently validate the findings, the bank's joint auditors have called for a forensic audit of the derivatives portfolio. The Institute of Chartered Accountants of India is also considering reviewing IndusInd Bank's financial statements to assess compliance with accounting and auditing standards. The Financial Reporting Review Board of ICAI is expected to lead this evaluation.

In light of these developments, reports suggest that the RBI is now examining the derivatives exposures of various private and public banks to determine whether the irregularities at IndusInd Bank are an isolated case or indicative of a broader industry concern.