Recent developments at IndusInd Bank have put the operational efficiency of the bank and stability into question.
Discrepancies in accounts, regulatory penalties, and management faults add to uncertainty over IndusInd Bank’s stability. Bank assures customers, investors of financial health
Recent developments at IndusInd Bank have put the operational efficiency of the bank and stability into question.
These range from accounting irregularities, fines imposed by the Reserve Bank of India (RBI), and uncertainty of leadership, all of which have added to uncertainty over its future, including depositors’ money.
IndusInd Bank has, however, reassured its stakeholders that its financial health is intact.
One of the major issues came to light in March 2025, when the bank said that it had a discrepancy in accounting for its foreign exchange derivatives.
The estimated impact of the discrepancy was reported at 2.35 per cent of the bank's net worth as of December 2024, worth about Rs 1,500 crore to Rs 1,600 crore. The bank's net worth as of December 31, 2024 was Rs 65,102 crore.
The revelation caught the stock market by surprise immediately, with shares of IndusInd Bank experiencing their steepest-ever plunge on March 4, 2025.
The stock settled 27.2 per cent lower at Rs 655.95 on the BSE, after hitting an intra-day low of Rs 649, which was its lowest since November 2020.
On the NSE, the shares plunged 27.06 per cent to Rs 656.80. This humiliating dip followed an almost 4 per cent drop the previous day when RBI capped CEO Sumant Kathpalia's time in office for just one year. The stock of the bank has now lost value for consecutive five sessions and declined 58 per cent from the 52-week high of Rs 1,576.35 on April 8, 2024. The bank’s market capitalisation was wiped off by around Rs 19,000 crore on March 11, 2025.
The sharp drop in IndusInd Bank stock price also impacted the broader market indices. The Nifty Private Bank index lost 1.38 per cent to 23,817.20, while the Nifty Bank index went down 0.75 percent to 47,853.95.
In December 2024, the RBI levied a monetary penalty of Rs 27.3 lakh against IndusInd Bank for non-adherence with deposit interest rate guidelines. The RBI was of the view that the bank had opened savings accounts for ineligible parties, and in doing so, had violated guidelines, which reflected the potential shortcomings in the bank's compliance with regulatory standards.
Contributing to the bank's woes, RBI recently approved reappointment of Sumant Kathpalia as managing director and chief executive officer (CEO) for a term of one year, rather than the three-year tenure proposed by IndusInd Bank's board.
The shorter period has also sparked doubts about stability of leadership in a period of operating ills. Although the bank has assured stakeholders that the transition will not change its strategic course, the brief tenure suggests that the RBI is closely monitoring the leadership and governance policies of the bank.
In November 2021, IndusInd Bank admitted that it had inadvertently given out about 84,000 loans without customer consent due to a technical glitch. Although the bank claimed that the issue was resolved effectively, the incident suggested internal process failures. This practice has further raised concern over the ability of the bank to operate its activities effectively.
IndusInd Bank has already hired an external agency to review and authenticate the findings independently. Since the final report is awaited, media reports suggest that PwC is likely to be the reviewing agency. The financial impact would be seen in the March 2025 quarter or June quarter of FY26. The bank has claimed that its profitability and capital adequacy are strong enough to absorb this one-time financial loss.
Ashoka Hinduja, promoter of the bank, has also ensured investors that the financials of the bank are healthy and promoters would infuse capital if any capital requirement occurred.
For IndusInd Bank's account holders, these developments raise understandable concerns. Issues related to accounting mis-steps, regulatory penalties, and leadership uncertainty may create doubts about the bank’s stability.
However, it is important to note that Indian banking regulations are designed to safeguard customer deposits. The RBI’s oversight ensures that banks maintain adequate capital to absorb financial shocks.
IndusInd Bank has also emphasised that its capital adequacy and profitability are strong enough to mitigate the recent financial shock. The reported capital position of the bank continues to be over regulatory issues, meaning that money in the customers’ accounts is not at the immediate risk of being lost.
Devina Mehra, founder and CMD of First Global, and renowned author, wrote in her LinkedIn post about the issue.
She said: “It is in the structure of the business where negative surprises will ALWAYS outweigh positive surprises. When banks lend and their customer does very well, unlike equity investors they do not get any extra income. In fact, on the margin they may well have to reduce interest rates. On the other hand, when something goes wrong with the borrower, the bank has to take a hit.”
She added: “This is one business where higher than expected growth may not be a good thing at all except that you come to know of the problems created only some years later. Add to it, the risk of losses on highly leveraged trading/investment positions (because a bank is inherently a leveraged institution) and this can deal a blow - sometimes a fatal one - to a bank."
While the recent developments have caused concern, customers can be proactive about their own interest and remain aware. Monitoring the bank's official announcements, a check on account statements for irregularities, and approaching customer service in case of confusion are necessary.
Overall, IndusInd Bank’s recent operational mistakes have undoubtedly affected investor confidence and customer faith. But with regulatory supervision still in place and the bank's assurance of financial solidity, account holders should not panic, but remain vigilant. Through heightened vigilance and active initiative, customers can be better positioned to work their way through their banking relationships during this time of uncertainty.