IndusInd Bank appoints ‘independent’ firm to investigate derivative portfolio discrepancies
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Private sector lender IndusInd Bank’s board has decided to appoint an independent professional firm to conduct a comprehensive investigation to identify the root cause of the discrepancies, assess the correctness and impact of the accounting treatment of the derivative contracts.
The investigation aims to identify any lapses and establish accountability, the lender said.
On March 10, 2025, the bank disclosed the ongoing review by an external agency, of certain discrepancies identified by the bank, in its account balances relating to its derivative portfolio. “Once completed, the Bank will appropriately reflect any resultant impact in its financial statements,” it had said.
On IndusInd Bank’s derivative transaction discrepancies and the subsequent erosion in investor wealth, IndusInd International Holdings Ltd (IIHL) chairman Ashok Hinduja said whenever the bank requires capital, the promoter has injected money. “Their capital adequacy is more than 15%. They don’t need any further capital,” said Hinduja. “It is beneficial for the promoter to put money in at this rates but it is not good for the institution,” he added.
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Earlier this month, IndusInd Bank announced that it had identified discrepancies in the accounting of derivative transactions conducted over the past 5-7 years for hedging its foreign currency borrowings. The bank has appointed an external adviser to review the processes, determine the root cause, and assess the impact of mark-to-market losses which is expected to be completed within the next 3 months.
Credit rating agency Moody’s said although it expects the near-term negative impact on the banks' profitability and capital due to this issue to be manageable, it highlights inadequate internal controls, which is a credit negative.
Moody’s said the impact of the derivatives transactions, coupled with the ongoing stress in the retail unsecured loans, is likely to hurt the IndusInd Bank’s profitability, capital and funding, potentially leading to a downgrade of the BCA (Baseline Credit Assessment).
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