IndusInd Bank, a private sector lender once seen as a rising star in India’s financial services landscape, is facing yet another storm. A fresh wave of accounting discrepancies totaling ₹1,269 crore has emerged, triggering resignations at the top, regulatory interventions, and growing concerns over the bank’s financial health and governance standards.
A Pattern of Misreporting: New Findings Spark Fresh Fears
IndusInd Bank is once again under scrutiny after its Internal Audit Department (IAD) unearthed irregular accounting entries worth ₹1,269 crore, raising serious concerns about governance and transparency at one of India’s major private sector banks. In a regulatory disclosure on May 15, the Bank admitted to misreporting ₹674 crore as interest income across three quarters of FY25, and recording unsubstantiated ₹595 crore balances under the “Other Assets” account.
The ₹674 crore interest income was reversed as of January 10, 2025, but the scale of the discrepancies has fueled fears that such lapses are not isolated, but systemic. These findings were not incidental. A whistleblower complaint prompted a deeper probe into the Bank’s financials, leading to the IAD’s report submission on May 8.
For a bank already in the spotlight for financial missteps, the timing couldn’t be worse.
Microfinance Troubles and Derivatives Debacle
The accounting shock comes on the back of deeper troubles in IndusInd Bank’s microfinance business. In March 2025, it reported a ₹1,580 crore discrepancy in its derivatives portfolio, with a potential hit of 2.35% to its net worth. Though the Bank appointed an external firm to validate these findings, the shadow over its MFI operations previously marred by allegations of “evergreening” loans through its subsidiary Bharat Financial Inclusion Ltd (BFIL) has returned.
This isn’t a first. In 2021, whistleblowers accused BFIL of disbursing loans without proper customer consent. Though the Bank denied deliberate wrongdoing, it admitted to disbursing 84,000 such loans due to a technical glitch—raising eyebrows about internal control systems that may still be broken.
In a series of escalating disclosures this year, IndusInd Bank informed investors in April of a possible ₹1,979 crore hit on its FY25 earnings due to cumulative accounting lapses. This was soon confirmed by forensic audit firm Grant Thornton, which pegged the final impact at ₹1,960 crore.
Leadership Meltdown and RBI Intervention
The fallout has been swift and severe. On April 29, in a dramatic development, both CEO Sumant Kathpalia and Deputy CEO tendered their resignations just a month after the Reserve Bank of India (RBI) granted Kathpalia only a one-year extension against the board’s recommendation for a three-year term.
The leadership vacuum has led to heightened anxiety in the markets. Investors fear that sudden exits could lead to operational instability, a run on deposits, and a further decline in asset quality. The RBI, stepping in promptly, approved a “Committee of Executives” on April 30 to manage the bank’s operations in the interim.
Meanwhile, this isn’t the first senior exit in recent months. CFO Gobind Jain had quit in January 2025, just before the Bank’s Q3 earnings report—another sign that all is not well within the Bank’s top ranks.
Earnings Pain, Market Panic, and Shareholder Concerns
The financial implications of this crisis are already being felt. IndusInd Bank’s Q3 FY25 results revealed a 39% year-on-year decline in profit at ₹1,402.3 crore, compared to ₹2,301 crore in the previous year. Net Interest Income (NII) also slipped marginally by 1.3% to ₹5,228.1 crore. Since January, the stock has lost over 20% of its value—eroding investor confidence and raising questions about long-term governance.
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In its May 15 filing, the Bank stated that it is taking steps to “strengthen internal controls, fix accountability, and take action as appropriate.” The IAD has reportedly examined the roles of key employees involved in these lapses. Still, for shareholders, such reassurances come after multiple rounds of financial and reputational damage.
Despite these setbacks, the Bank has insisted that its capital adequacy remains robust, and profitability though dented can absorb these hits. Whether this will reassure markets and stakeholders, however, remains to be seen.