New Delhi: IndusInd Bank is grappling with serious internal audit findings after a whistleblower complaint triggered a deeper examination of its books. The bank disclosed that its Internal Audit Department (IAD) found unsubstantiated balances amounting to ₹595 crore under the “other assets” section of its balance sheet. These were later adjusted in January 2025 against similar figures in “other liabilities”, raising significant concerns over accounting integrity and financial transparency.
₹674 Crore Interest Misstatement Adds to Trouble
Adding to its woes, the bank revealed that a cumulative ₹674 crore was incorrectly recorded as interest income over three quarters in FY24-25. This was fully reversed by January 10, 2025, but not before causing distortions in reported earnings. The IAD, with the support of EY, investigated these discrepancies as part of a broader review of the bank’s microfinance institution (MFI) business.
Leadership Crisis and Board Response
The fallout from these revelations has already led to a leadership shakeup. CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned on April 29, 2025. The board has since appointed a Committee of Executives to manage operations temporarily. In response to internal lapses, the bank says it is working to “strengthen internal controls” and “fix accountability”.
Forensic Audit and Regulatory Scrutiny
In light of the accounting lapses—including a separate issue in the derivatives portfolio that negatively impacted the bank’s net worth by 2.35%—IndusInd Bank has appointed Grant Thornton to carry out a forensic audit. The firm will investigate the root causes, assess compliance with accounting norms, and recommend remedial measures.
In March, PwC had estimated the impact of derivatives misreporting at Rs 1,979 crore as of June 30, 2024. These repeated lapses have drawn regulatory and investor attention.
Moody’s Downgrades Outlook
Rating agency Moody’s affirmed the bank’s credit rating but downgraded its outlook to “negative”, citing weak internal controls, inadequate oversight, and concerns over leadership succession. The bank’s standalone credit profile was downgraded to ba2 from ba1, further underlining growing concerns over governance and risk management.
