IndusInd Bank’s shares dropped 2.42% to Rs 817 following the resignation of CEO Sumant Kathpalia amid an ongoing probe into accounting discrepancies related to the bank’s derivatives portfolio.
Kathpalia’s resignation, effective immediately, marks the end of his five-year leadership at the bank, just as it faces serious financial challenges.
The Leadership Shake-Up
Kathpalia’s departure comes on the heels of another high-profile resignation.
Deputy CEO Arun Khurana stepped down the day before, citing the significant adverse effect of “incorrect accounting for internal derivative trades” on the bank’s profit and loss statements. Khurana, who had been promoted to CFO earlier this year, was directly responsible for overseeing the treasury front office, where the issue first surfaced.
The exits of both top executives come amid a broader restructuring within the bank’s finance division.
Khurana’s rise to CFO followed the sudden resignation of former CFO Gobind Jain, who left for personal reasons. These leadership changes leave the bank in a precarious position, with uncertainty surrounding its future direction.
Editor’s Take | IndusInd Bank’s CEO Sumant Kathpalia steps down after external auditors uncover a major accounting error. Derivative loss overlooked by management raises serious questions.
RBI steps in! What’s next for shareholders? @nikunjdalmia breaks it down. pic.twitter.com/id0ALf4D2x
— ET NOW (@ETNOWlive) April 30, 2025
The Accounting Scandal
The root of the turmoil lies in discrepancies in the bank’s derivatives accounting. A report by PricewaterhouseCoopers (PwC), commissioned by IndusInd Bank, has put the negative impact on the bank’s net worth at Rs 1979 crore.
The report revealed that these accounting errors could reduce the bank’s net worth by 2.27% on a post-tax basis, slightly lower than the bank’s previous estimate of 2.35%.
For those wondering what this means for the average person, it’s simple: the financial fallout could affect IndusInd Bank’s ability to serve customers effectively. This is especially concerning for those with loans, credit cards, or microfinance accounts, as the uncertainty could lead to disruptions in services or an uptick in borrowing costs.
Also Read IndusInd Bank Shake-up: Changes to Top Management After ₹1,959.98 Crore Accounting Issue
A Glimmer of Hope Amid Crisis
Despite the financial setback, the bank’s board has acted swiftly to stabilize the situation. Seeking approval from the Reserve Bank of India (RBI), the board plans to form an interim ‘committee of executives’ under Section 10B(9) of the Banking Regulation Act. This committee would assume CEO responsibilities until a permanent leader is appointed, ensuring that the bank’s operations continue with minimal disruption.
A Shrinking Bottom Line
IndusInd Bank’s financial performance has also taken a hit. The bank reported a 39% drop in its standalone net profit, which fell to Rs 1,401.28 crore. Despite this, the bank saw an 8.5% year-on-year increase in total income, which reached Rs 15,151.01 crore for Q3 FY25, compared to the same period last year. This shows that while the bank is still generating income, its profitability has been severely impacted by the accounting issues.
What’s Next?
As the bank works to recover from this crisis, stakeholders, from shareholders to customers, will be watching closely. The leadership reshuffle signals a major turning point, and the role of the interim committee could determine the bank’s future trajectory.
For investors, the immediate drop in stock value serves as a reminder of how sensitive the market can be to leadership changes and financial missteps.
This moment of turmoil also highlights the importance of transparency and accountability in banking. With high-profile resignations and a comprehensive investigation underway, IndusInd Bank’s handling of this crisis will be closely scrutinized. As it navigates these turbulent waters, only time will tell whether it can regain stability and investor confidence.
