IndusInd Bank refutes ‘factually incorrect’ media reports claiming CEO, deputy to exit after accounting lapses

IndusInd Bank has denied media reports claiming that the Reserve Bank of India (RBI) has urged the private lender's CEO, Sumant Kathpalia and deputy CEO, Arun Khurana, to step down from their respective board positions after the private lender came under RBI's radar for significant accounting lapses. In a statement, IndusInd Bank termed the reports as ‘factually inaccurate.’

“We would like to clarify that the recent media reports regarding the tenure of the Bank’s CEO and Deputy CEO are factually incorrect. The bank strongly denies the claims made in these articles. The information circulating is entirely inaccurate and does not reflect the true situation," said IndusInd Bank's official spokesperson in a statement late Friday, March 21.

Also Read: IndusInd Bank fiasco: How could it impact banking sector & is it a stock to buy amid recovery?

IndusInd Bank denies ‘factually inaccurate’ reports

Earlier today, news agency Reuters reported that the RBI had urged the CEO of IndusInd Bank and his deputy to step down after significant accounting lapses as soon as replacements are found and the central bank has approved them.

A source briefed by top management told Reuters that the RBI made clear it had lost confidence in the top executives but wanted an orderly transition to avoid unnerving depositors and account holders. A second source told Reuters that the RBI recently approved a one-year extension for Kathpalia and clarified that it wanted the candidates to come from outside IndusInd.

Also Read: RBI directs IndusInd Bank to complete remedial action in Q4: ‘Well capitalised, depositors need not worry’

While a bank's board recommends top executive positions, RBI approval is required. The central bank is known to offer informal advice to lenders facing governance or financial concerns that it would prefer an external candidate.

The first source told Reuters that the accounting lapse was a clear issue of lack of oversight, and another source highlighted it had come to light in September 2024 when it was flagged to the bank's CEO, Sumant Kathpalia.

Also Read: IndusInd Bank fallout compels RBI to begin industry-wide review of derivative books

IndusInd Bank accounting lapse

IndusInd is India's fifth-largest private lender. On March 10, it disclosed that its derivatives portfolio was overvalued by around 2.35 per cent - after non-compliant internal trades. It noted discrepancies in its derivatives portfolio, which could result in a one-time loss of ₹2,000 crore in the March quarter.

The discrepancies were unearthed during the review of its currency derivatives portfolio. The bank, headed by Sumant Kathpalia, has appointed external investigators. His deputy, Arun Khurana, also heads the global markets division, which includes the derivatives portfolio.

After the discrepancies were disclosed, On March 15, the RBI said that IndusInd Bank remains "well-capitalised and the financial position remains satisfactory". The official statement followed concerns arising from recent developments at the Mumbai-headquartered private lender. Shares of IndusInd Bank have tumbled 33 per cent in March and 29 per cent year-to-date (YTD).