IndusInd Bank board suspects employees committed fraud against the lender

The board of IndusInd Bank Ltd suspects certain employees in critical accounting and financial reporting functions to be involved in perpetrating fraud against the lender, the lender said on Wednesday.

The board has decided to take “necessary steps,” including reporting to regulatory authorities and investigative agencies, and fix accountability of all persons responsible for these lapses.

These actions follow investigation reports relating to accounting of internal derivative trades, “certain unsubstantiated balances in other assets and other liabilities accounts of the bank,” and microfinance interest income.

According to the disclosure on Wednesday, the internal audit department of the bank on Tuesday submitted its report which showed ₹172.58 crore was incorrectly recorded as fee income in the microfinance business over three quarters ending 31 December, and reversed in the fourth quarter (Q4) of fiscal year 2025 (FY25).

Also read | ₹2,329 crore, NII dips 43% YoY on MFI stress; FY25 profit tanks 71%”>IndusInd Bank Q4 Results: Net loss widens to ₹2,329 crore, NII dips 43% YoY on MFI stress; FY25 profit tanks 71%

Mint reported on 6 May that IndusInd Bank’s statutory auditors were reviewing the lender’s latest quarterly numbers when they noticed something amiss: the bank had bunched interest income from many microfinance loans together, instead of making individual entries for them.

“The bank has appropriately accounted for and reflected the impact of all discrepancies identified in these reports while finalizing the financial results for the quarter/ twelve months ended 31 March,” it said.

On 10 March evening, the bank admitted that in the September-October quarter, it identified discrepancies in its derivatives portfolio. Shares of the lender plunged 27.2% the next day.

On 20 March, IndusInd Bank said it appointed an independent professional firm to identify the root cause of the derivative discrepancies. This report was submitted to the bank on 26 April. In an exchange filing on 27 April, the bank said that the report has pegged the cumulative adverse accounting impact at ₹1,959.98 crore as on 31 March. It also said that the problem lay in “incorrect accounting of internal derivative trades” and that the report examined the roles and actions of key employees in this context.

IndusInd Bank is in the middle of a management transition after two top executives left in quick succession following incorrect accounting of derivative trades left a ₹1,959 crore hole in its books. The first to go was deputy chief executive Arun Khurana, who resigned two days after Grant Thornton submitted its report on the lapses. This was followed by chief executive Sumant Kathpalia, who left before the bank could find a successor.