Reserve Bank of India (RBI) has asked the CEO of IndusInd bank, Sumant Kathpalia and his deputy, Arun Khurana to resign after their replacements are found. The central bank has reportedly said that it has lost confidence in the current leadership of the fifth largest private lender in the country, Reuters reported, citing sources.
RBI has extended Kathpalia’s tenure for a year as the central bank wanted a transition without disruption in the functioning. The bank’s regulator has also asked that the new leadership should be from outside IndusInd.
However, IndusInd rejected the development and mentioned that reports regarding the tenure of the bank’s CEO and deputy CEO are factually inaccurate.
“We would like to clarify that the recent media reports regarding the tenure of the bank’s CEO and deputy CEO are factually incorrect,” said the bank.
What’s Wrong With IndusInd?
This comes after IndusInd declared that its derivatives portfolio was overvalued by nearly 2.35% to Rs 2,100 crore due to non-compliant internal trades on March 10. The derivatives portfolio is headed by the deputy CEO. After discovering such lapses, the board of directors appointed an independent professional firm to probe the root cause of the discrepancies, assess the correctness and impact of the accounting treatment of the derivative agreements in alignment with the prevailing accounting standards.
“The board of directors decided to appoint an independent professional firm to conduct a comprehensive investigation to amongst others, identify the root cause of the discrepancies, assess the correctness and impact of the accounting treatment of the derivative contracts with regard to the prevailing accounting standards,” the bank said in an exchange on March 20.
The sources in the Reuters report noted that the financial lapses that violated RBI’s April 2024, are presently not viewed as an industry-wide concern.
While the investigation is still going on, the ratings agency Moody’s has kept the IndusInd Bank’s baseline credit assessment (BCA) under review for a potential downgrade after the financial misconduct disclosure.
