— In a significant leadership change, Sumant Kathpalia has resigned as the Managing Director and CEO of IndusInd Bank, taking moral responsibility for a derivatives accounting lapse that has impacted the bank’s financial standing and investor confidence.
Background
IndusInd Bank disclosed discrepancies in its derivatives portfolio in March 2025, stemming from internal trades used to hedge foreign currency exposures. These trades were not accounted for in the same manner as external trades, leading to a mismatch that went unnoticed for several years.
An internal review estimated the pre-tax loss at ₹2,100 crore, resulting in a post-tax impact of ₹1,580 crore, equivalent to 2.35% of the bank’s net worth as of December 2024. The bank has engaged an external agency to independently review and validate these findings.
Leadership Changes
Following the revelation, both CEO Sumant Kathpalia and Deputy CEO Arun Khurana tendered their resignations. The Reserve Bank of India (RBI) has approved the formation of an interim executive committee to oversee the bank’s operations during this transition period.
Financial Impact and Market Reaction
The bank has confirmed that the financial impact of the discrepancies will be accounted for through the Profit and Loss statement in the fourth quarter of FY2025, rather than adjusting general reserves.
Following these developments, IndusInd Bank’s shares experienced a significant decline, dropping over 26% to ₹663.65 on the NSE, marking a near four-year low.
Regulatory Oversight
The RBI has been informed of the discrepancies and is monitoring the situation closely. The central bank’s intervention aims to ensure stability within the banking sector and maintain public confidence. Additionally, the RBI has begun probing other banks’ derivatives books to determine whether similar accounting mismatches exist elsewhere.
