IndusInd Bank MD and CEO Sumant Kathpalia resigns with immediate effect

Bank seeks RBI nod for panel to discharge CEO duties

Sumant Kathpalia, managing director and chief executive officer (MD & CEO) of IndusInd Bank, resigned on Tuesday with immediate effect, citing “moral responsibility” for “various acts of commission/omission” following accounting lapses that resulted in a loss of nearly ₹2,000 crore.

 

His departure follows the submission of a report by Grant Thornton, the firm appointed by the bank to investigate the root cause of the discrepancies in the derivatives portfolio and examine the roles and actions of key employees. On Monday, deputy CEO Arun Khurana had also resigned in connection with the same accounting issues.

 

In his resignation letter, Kathpalia stated: “I wish to submit my resignation from the services of the bank in relation to the ongoing derivatives discussion. I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice.”

 

 

The bank’s board has approached the Reserve Bank of India (RBI) seeking approval to constitute a “committee of executives” to oversee the duties, roles, and responsibilities of the

 

CEO on an interim basis until a permanent successor is appointed. Last year, Thoothukudi-based Tamilnad Mercantile Bank had taken a similar step, appointing a three-member Committee of Executives (COEs) in the absence of a CEO.  

 

In March this year, the RBI had extended Kathpalia’s term as MD & CEO by one year, despite the board clearing him for a three-year extension. This was a second consecutive time since March 2023 that the RBI had approved a shorter tenure despite the board approving a three-year term for Kathpalia.

 

Kathpalia had noted during an analyst call that discrepancies in the bank’s derivatives portfolio might have influenced the RBI’s decision to limit his extension.

 

Appointed MD & CEO in March 2020, Kathpalia had succeeded Romesh Sobti, who had led the bank for over a decade. Prior to this, Kathpalia headed IndusInd’s consumer banking division and was based in Delhi. Earlier, he had led the consumer loans division at ABN Amro Bank and joined IndusInd in 2008, alongside Sobti and others.

 

On Sunday, the Mumbai-based bank disclosed that Grant Thornton had identified the incorrect accounting of internal derivatives trades – particularly in cases of early termination – as the root cause of the issue. These trades led to the recording of notional profits, which in turn resulted in significant accounting discrepancies.

 

The firm estimated the cumulative adverse impact on the bank’s profit and loss account at ₹1,959.98 crore as on March 31, 2025.

 

The episode began unfolding on March 10, when IndusInd Bank informed stock exchanges that an internal review had uncovered discrepancies in its derivatives portfolio. At the time, the bank estimated an adverse impact of 2.35 per cent on its net worth as of December 2024.

 

The bank subsequently appointed PwC to validate the estimated loss, and later brought in Grant Thornton to conduct a comprehensive investigation into the root cause.

 

On April 15, the bank said that PwC had confirmed discrepancies and estimated a negative impact of ₹1,979 crore as on June 30, 2024. Based on PwC’s report, the post-tax impact on net worth as of December 2024 would be 2.27 per cent. As of the December quarter, the bank’s net worth stood at ₹65,102 crore.

 

During Kathpalia’s tenure, IndusInd’s loan book expanded to ₹3.66 trillion (9MFY25) from ₹2.06 trillion, while its deposit base rose to ₹4.09 trillion from ₹2.02 trillion. The bank’s net worth grew from ₹34,387 crore to ₹67,106 crore over the same period.

 

A chartered accountant by training, Kathpalia has worked with foreign banks, including Citibank and Bank of America. He is widely credited with developing IndusInd’s consumer loans portfolio, part of a strategy to diversify the lender’s exposure. He took the reins at a time when the bank’s stock was under pressure due to concerns over exposure to the telecom sector.