IndusInd Bank Reports First Quarterly Loss in Nearly Two Decades
IndusInd Bank has reported a significant quarterly loss of Rs 2,236 crore for the three months ending March 2025, marking its first loss since March 2006. This downturn follows the unexpected departures of the bank’s chief executive and his deputy amid revelations of serious irregularities in its foreign exchange derivatives and microfinance sectors. Despite managing to record a profit of Rs 2,642 crore for the fiscal year 2025, this figure represents a staggering 70% decline from the previous year’s profit of Rs 8,950 crore.
Financial Irregularities Uncovered
The bank’s recent financial disclosures reveal alarming findings from both internal and external audits. A new fraud case has emerged, involving Rs 172.6 crore that was incorrectly recorded as fee income within its microfinance division. Broader discrepancies have also been identified, affecting derivative trades, income recognition, and the classification of assets and liabilities. The board suspects that senior employees may be involved in these fraudulent activities and plans to report the findings to enforcement agencies.
Chairman Sunil Mehta informed analysts that the bank ceased the accounting of internal derivatives starting in April 2024, following confirmation of these irregularities by external reviewers. Additional audits revealed that income was misclassified, and loans were incorrectly categorized, leading to an under-provisioning of Rs 1,885 crore. Furthermore, the bank misbooked Rs 760 crore of interest income that should have been accounted for differently.
Impact on Leadership and Future Actions
The abrupt exits of the bank’s chief executive and deputy have raised concerns about governance and oversight within the institution. Mehta emphasized that the board is committed to ensuring accountability and will take necessary actions in accordance with the law. He reassured stakeholders that all identified issues have been addressed and disclosed, and that the new CEO will start with a clean slate.
The statutory audit for fiscal year 2025, conducted by MSK & Associates and Chokshi & Chokshi, has revealed a troubling history of financial mismanagement. Among the most serious findings was a write-off of Rs 1,960 crore in “accumulated notional profits” dating back to fiscal year 2016, attributed to internal trades. Auditors also flagged the reversal of cumulative interest and fee income totaling Rs 846.4 crore recorded during the year.
Long-Term Consequences and Stakeholder Reactions
The ramifications of these financial irregularities may extend beyond immediate losses, potentially impacting the bank’s reputation and stakeholder confidence. The findings from the audit have highlighted significant lapses by former key management personnel, raising questions about the effectiveness of internal controls and governance structures.
As the bank navigates this challenging period, stakeholders are closely monitoring the situation. The board’s commitment to transparency and accountability will be crucial in restoring trust among investors and customers. The new leadership will face the daunting task of addressing these issues while also working to stabilize the bank’s financial standing in the wake of this unprecedented loss.
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