IndusInd Bank shares sink 3% as MD and CEO Kathpalia tenders resignation

The private lender's stock fell as much as 3.31 per cent during the day to ₹810.05 per share

Shares of IndusInd Bank Ltd. slipped over 3 per cent in Wednesday's intraday trade after the lender's Managing Director and Chief Executive Officer, Sumant Kathpalia, tendered his resignation, citing “moral responsibility” after derivatives lapses that resulted in a loss of nearly ₹2,000 crore.

 

The IndusInd Bank's stock fell as much as 3.31 per cent during the day to ₹810.05 per share. The stock pared losses to trade 2.15 per cent lower at ₹818 apiece, compared to a 0.08 per cent advance in Nifty50 as of 10:12 AM. 

 

The company's counter snapped its five-day gaining streak on Wednesday and has risen over 35 per cent from its recent low of ₹606, which it hit last month. The stock has fallen 14.7 per cent this year, compared to a 2.9 per cent advance in the benchmark Nifty50. The lender has a total market capitalisation of ₹63,769.5 crore, according to BSE data.  

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IndusInd Bank CEO exit 

 

IndusInd Bank in an exchange filing on Tuesday said that Sumanth Kathpalia resigned on Tuesday with immediate effect, citing “moral responsibility” for “various acts of commission/omission”. “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,” he said in his resignation letter. 

 

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

 

Earlier this month, Arun Khurana, deputy CEO of the lender has also resigned with immediate effect. “Considering the recent unfortunate developments, wherein the Bank determined an adverse accounting impact on P&L, on account of incorrect accounting for internal derivative trades, I having oversight of the Treasury Front office function, as the Whole Time Director, Deputy CEO and a part of Senior Management of the bank, hereby resign, effective immediately,” Arun Khurana said in his  resignation letter.  

Derivatives discrepancies

 

The resignation comes after the external agency — PwC — appointed to validate the findings of its internal review identified discrepancies in its derivatives portfolio and estimated a negative impact of ₹1,979 crore as of June 30, 2024. 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. 

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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.

 

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