Shares of IndusInd Bank have dropped to their lowest level since November 2020 as investors were hit with back-to-back news of RBI approving a less-than-sought tenure for its MD and CEO followed by discrepancies in the accounting of derivatives with analysts estimating an impact of ₹21 billion (pre-tax).
On Tuesday, the scrips of the lender tanked 27.06 per cent at the National Stock Exchange to ₹656.80. On November 3, 2020, the bank’s scrips on the NSE were at ₹646.6.
Following a hastily scheduled board meeting on Monday evening, the bank informed the bourses that it had identified certain discrepancies that are estimated to have an adverse impact of around 2.35 per cent of the bank’s net worth as of December 2024.
“The bank has also appointed a reputed external agency to independently review and validate the internal findings. A final report is awaited and basis which the bank will appropriately consider any resultant impact in its financial statements. The bank’s profitability and capital adequacy remains healthy to absorb this one-time impact,” IndusInd Bank said in a stock exchange filing.
“According to RBI directives on investments issued in September 2023, banks are prohibited from conducting internal trades/hedging and, accordingly, IndusInd Bank too ceased internal trades with effect from April 1, 2024.
“However, during an internal review, the bank identified certain discrepancies where the accounting of losses on forex derivatives/swap transactions executed prior to April 2024 (over the past 5-7 years) to hedge forex deposits/debt were not recognised through income, while the corresponding treasury gains were recognised in the profit and loss.
“These losses (pre-tax at ₹21 billion and post-tax at ₹15.8 billion) are estimated to have an adverse impact of 2.35 per cent on its net worth as of December 2024,” Emkay Research said on Tuesday.
“IndusInd Bank clarified that it shall take the hit through profit and loss which, coupled with accelerated provisions on the MFI (microfinance) portfolio, shall push the bank into losses during Q4FY25 and drive down the FY25 estimated return on assets by around 30 basis points to 0.9 per cent, in our view. Notably, the ex-CFO (Govind Jain, who resigned in January 2025) was also aware of this accounting discrepancy,” the report said.