IndusInd Bank’s Managing Director & CEO Sumant Kathpalia told ET Now that the bank noted something off in its businesses around September-October 2024. Bank hired an external agency to review the business and get the numbers double-checked. An external agency reviewed the bank books and found the mistake in how the bank kept track of some financial trades, specifically foreign currency derivatives. Banks use derivatives to protect themselves from currency value changes, but the bank didn’t record them correctly in its books.
Such errors made the financial reports looked stronger than they actually were. They showed more profits and fewer losses than reality. This error could cause the bank a loss of ₹1,979 crore as of June 30, 2024, and the bank’s net worth (overall value after subtracting all debts) could drop by 2.27% by December 2024.
The CEO said that the loss will be counted as an expense in the bank’s profit and loss report and will not try to hide in its reserves. This loss will impact its Q4 FY25 financial results.
This review happened because in September 2023, the Reserve Bank of India (RBI) introduced new rules about how banks should handle and keep records of their derivative investments (special financial deals). The aim was to make everything more clear and accurate in their records. The rules became effective on April 1, 2024.