External audit agency uncovers Rs 1,979 crore impact on IndusInd Bank

Private sector lender IndusInd Bank on Tuesday said that the external agency — PwC — appointed to validate the findings of its internal review has identified discrepancies in its derivatives portfolio and estimated a negative impact of ₹1,979 crore as of June 30, 2024. The bank said it received the report from the external agency on April 15.

 

“The bank has since received the report from the external agency on April 15, which identified discrepancies, inter alia, relating to derivatives deals. The report has quantified the negative impact of the above as of June 30, 2024, at ₹1,979 crore,” the private sector lender said in an exchange notification.

 

Based on the external agency’s report, the bank said that the discrepancies would have an adverse post-tax impact of 2.27 per cent on its net worth as of December 2024. In the October-December quarter (Q3) of 2024-25 (FY25), the bank’s net worth was ₹65,102 crore.

 

“The bank will appropriately reflect the resultant impact in the financial statements for FY25 and continue to take suitable steps to augment the internal controls relating to the derivatives accounting operations of the bank,” it said in the exchange notification.

 

Previously, on March 10, the bank had disclosed to the exchanges that in an internal review, it had found discrepancies in its derivatives portfolio, which would have an adverse impact of 2.35 per cent on its net worth as of December 2024, or roughly ₹1,530 crore.

 

At that time, the bank had said that it appointed PwC to review the estimate of the loss in the derivatives portfolio. Later, the bank disclosed that it had decided to appoint an independent professional firm to conduct a comprehensive investigation to identify the root cause of the discrepancies in the derivatives portfolio of the bank.

 

Amidst this, the Reserve Bank of India (RBI) issued a statement assuring the bank’s depositors not to react to speculative reports surrounding the bank, as its financial health was stable.

 

Meanwhile, the bank borrowed heavily from the certificate of deposit (CD) market to tide over any liquidity situation. In March, the bank raised ₹16,550 crore in CDs at a coupon rate of 7.75 per cent to 7.9 per cent. This was about five times higher than the average amount it typically raised from the CD market previously.

 

Previously, the RBI granted Sumant Kathpalia, the current managing director and chief executive officer of the bank, only a one-year extension, despite the bank’s board recommending a three-year reappointment. Kathpalia, in an analyst call, had highlighted that the discrepancies found in the derivatives portfolio of the bank could be one of the reasons why the RBI gave him only a one-year extension.

 

Kathpalia has assured that IndusInd Bank will report net profit in the fourth quarter (Q4) as well as for the full financial year (FY25), despite the hit on the bottom line due to discrepancies discovered in the derivatives portfolio.

 

IndusInd Bank disclosed earlier this month, in its quarterly update, that its retail and small business customer deposits declined by ₹3,550 crore in the quarter ending March 2025 (Q4FY25), dropping from ₹1.88 trillion to ₹1.85 trillion. However, the bank’s overall deposits grew marginally by 0.4 per cent compared to Q3FY25. The bank's deposit portfolio at the end of Q4 stood at ₹4.11 trillion, reflecting a 6.8 per cent year-on-year growth from ₹3.84 trillion.

 

During this period, the bank’s overall advances portfolio shrank by roughly ₹19,000 crore from the December quarter. 

REPORT CARD  - PwC report identified discrepancies in its derivatives portfolio

- The bank has assessed negative impact of 2.27% on its net worth, as of December 2024

- IndusInd’s internal review had estimated a hit of 2.35% on its net worth

- It will take steps to augment internal controls relating to derivatives accounting