Mumbai— IndusInd Bank Managing Director and CEO Sumant Kathpalia has resigned following a major derivatives accounting lapse that significantly impacted the bank’s financials. His departure comes just a day after Deputy CEO Arun Khurana also stepped down in connection with the same issue.
An independent forensic audit, commissioned by the bank and conducted by a professional firm, confirmed accounting discrepancies in the bank’s derivatives portfolio. The final report, submitted on April 26, revealed that incorrect accounting practices resulted in a cumulative loss of ₹1,959.98 crore to the bank’s profit and loss account as of March 31, 2025.
In his resignation letter, Kathpalia stated, “I wish to submit my resignation… 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 issue first surfaced on March 10 when the bank disclosed that mark-to-market (MTM) losses in its derivatives book could erode up to 2.35% of its net worth as of December 2024—an estimated ₹1,600 crore—due to errors found during an internal review.
Following this disclosure, the Reserve Bank of India (RBI) directed the bank to appoint global audit firm Grant Thornton Bharat to conduct a forensic investigation. The probe found that internal derivative trades, particularly those involving early termination, had been incorrectly accounted for, leading to inflated notional profits and misleading financial reporting.
In response to the leadership exits, the bank has requested the RBI’s approval to form an interim executive committee to oversee CEO responsibilities.
Notably, the RBI had earlier raised concerns over governance and transparency at IndusInd Bank. In March, the central bank approved only a one-year extension for Kathpalia, rejecting the bank’s proposal for a full three-year term.
The accounting issues stemmed from internal derivative transactions that failed to comply with RBI’s updated regulatory framework introduced in April 2024. These updates followed a broader overhaul of commercial bank investment portfolio rules announced by the RBI in September 2023. (Source: IANS)
