Mumbai: The stocks of IndusInd Bank, the fifth private sector bank, fell by more than 27 percent on Tuesday as the bank announced discrepancies in its derivative portfolio. In derivative accounting, the discrepancies exposed the discrepancies caused panic among investors and started selling. On Tuesday, the share price on NSE closed at Rs 655.95, with the highest price of Rs 810.45 and the minimum price of Rs 649. In a single day, the share price fell by Rs 244.55 or 27.16 percent. The bank’s market capitalization declined by Rs 18,000 crore to Rs 51,100 crore.
Analysts have warned that the bank’s revelations may affect its revenue, and they have also expressed concern about the bank’s weak internal control.
During the internal review done by the bank, it was found that the bank had underestimated the hedging cost related to the previous foreign exchange transactions. The bank has estimated that this discrepancy will affect the bank’s net assets of Rs 1,530 crore.
After this announcement of the bank, investors got nervous and large -scale selling, causing the share price to reach the lowest level after November 2020. Analysts have also expressed concern about the bank’s administrative functions and weak internal control. Questions are also being raised on compliance measures adopted by banks.
Following the new master instructions of the Reserve Bank of India (RBI) on derivatives, the bank came to know about this discrepancy between September and October 2024. The bank gave this information to the exchanges after the board meeting on Monday.
Analysts are also considering it as a serious matter because the Reserve Bank of India has extended the tenure of the bank CEO for only one year instead of three years. This case of IndusInd Bank may shake the trust of investors in bank shares.
Due to low hedging costs, incorrect assessment was recorded in bank accounts. The issue is related to compliance with the new guidelines of the Reserve Bank on derivative portfolio management. Bank sources said that the bank has started a detailed internal review and has also appointed an external agency to investigate the discrepancies. However, the bank’s management has clarified that the bank’s profitability and capital adequacy are strong and it can tolerate a lump sum adverse effects. Its impact may be seen in the last quarter of the current financial year or the results of the first quarter of the next financial year.
An analyst stated that the bank’s stock rating could be reduced even further due to concerns raised about weak internal control.
IndusInd Bank has faced several negative developments in the current financial year. Challenges before the bank include pressure on the bank’s microfinance, resignation of Chief Financial Officer (CFO) before the December quarter results, decision to extend the tenure of Chief Executive Officer (CEO) for only one year inste
Promoter Ashok Hinduja clarified that the bank’s financial position is strong
Mumbai: IndusInd Bank promoter Ashok Hinduja said that the bank’s financial condition is good and he expressed his desire to insert new capital in the bank if needed. He said in an interview to a TV channel that the bank can remove the discrepancies found in derivative accounting.
The shareholders do not need to panic. These are common problems. He also said that the Reserve Bank’s approval is awaited on the proposal to increase the stake of promoters in the bank from 15 percent to 26 percent.
He said that after getting approval from the Reserve Bank, the promoters will put capital in the bank if needed.
