IndusInd Bank fiasco: ₹674 cr wrongly booked as interest in MFI biz

IAD also flags ₹595 crore of unsubstantiated balances in "other assets", as whistleblower complaint prompts deep dive into IndusInd Bank's microfinance portfolio

IndusInd Bank on Thursday disclosed to the exchanges that a review of the bank’s microfinance business by the internal audit department (IAD) has found an incorrect recording of ₹674 crore as interest income over three quarters of FY25. The amount was fully reversed as of January 10.

 

The bank has also informed the exchanges that pursuant to receipt of a whistleblower complaint, the audit committee asked the IAD to review transactions recorded under “other assets” and “other liabilities”.

 

In a report on May 8, the IAD revealed unsubstantiated balances aggregating to ₹595 crore in “other assets” accounts, which were then set off against corresponding balances under “other liabilities” accounts in January 2025.

 

“The IAD has also examined the roles and actions of key employees in this context. The board is taking necessary steps to strengthen internal controls, fix accountability of the persons responsible for these lapses, and will take action as appropriate,” the bank said in its disclosure.

 

The bank has made these disclosures following a news report that said the bank’s IAD was examining a series of past accounting reversals that were flagged in a whistleblower letter to the Reserve Bank of India (RBI) and the bank’s board of directors. 

 

In April, the bank had disclosed that the IAD was reviewing the microfinance business after certain concerns were brought to its attention. EY was engaged to assist in examining relevant records.

 

That disclosure followed a news report claiming the bank had appointed EY to conduct an audit of its microfinance portfolio due to a ₹600 crore discrepancy.

 

As of the December quarter, IndusInd Bank’s microfinance (MFI) portfolio stood at ₹32,564 crore, accounting for 9 per cent of its total loan book. The MFI segment has been under stress, in line with the broader industry. In Q3FY25, the bank reported incremental slippages of ₹2,200 crore, a major portion of which originated from the MFI portfolio.

 

Last month, the bank’s MD & CEO and deputy CEO resigned from their positions taking moral responsibility for the discrepancy in the derivative portfolio that has led to a nearly ₹2,000 crore loss.

 

Following their resignations, the RBI approved IndusInd Bank’s request to form an executive committee to discharge the duties and responsibilities of CEO for a period of maximum three months or till a new CEO takes charge, whichever is earlier.

 

The bank’s board has constituted the “committee of executives”, which comprises Soumitra Sen as head of consumer banking and Anil Rao as chief administrative officer.