Mint Explainer: Who will run IndusInd Bank without senior leadership?

His resignation came a day after executive director and deputy CEO Arun Khurana, also involved in the probe, resigned. 

IndusInd Bank is the latest private sector lender to witness a senior leadership crisis, following Yes Bank, RBL Bank, Lakshmi Vilas Bank, and Tamilnad Mercantile Bank in recent years.

Mint explains how the IndusInd changeover might be different from management changes seen at other banks, especially those involving the Reserve Bank of India.

How is the IndusInd management change different from others?

The bank’s board has driven the management change at IndusInd Bank by asking the CEO and the deputy CEO to take accountability for the incident and step down from their positions. In the other four cases, the banking regulator superseded the boards and took control of the banks.

What is the current status of the IndusInd management?

The regulator has allowed the bank’s board to set up a ‘committee of executives’ to run the lender for three months or until a new MD is appointed, whichever is earlier. The bank had sought the regulator’s approval for this after Kathpalia’s resignation.

The ‘committee of executives’ will comprise Soumitra Sen, head of consumer banking and marketing, and Anil Rao, chief administrative officer. They will oversee the bank’s operations under the oversight and guidance of an oversight committee of the board. The oversight committee, in turn, will be headed by the board’s chairman and will include the chairs of the bank’s audit committee, compensation and nomination and remuneration committee, and the risk management committee.

What has been the RBI’s stance on the IndusInd crisis?

Following the 10-March disclosure about the accounting lapses, the central bank issued a statement on 15 March, saying the bank is well-capitalised and its financial position remains satisfactory. The RBI then said it had asked the board and management to complete the remedial action in the March quarter of 2024-25 after making the required disclosures to all stakeholders.

“As such, there is no need for depositors to react to the speculative reports at this juncture. The bank’s financial health remains stable and is being monitored closely by the RBI,” the regulator had said. 

The regulator has not said anything more officially on the crisis.

In the post-monetary policy conference on 9 April, RBI governor Sanjay Malhotra said the recent incidents were “episodes” and not “total failure” and that the overall banking system continues to be safe, secure, robust, and resilient. 

He was responding to a question on larger systemic concerns from incidents at three financial entities—accounting lapses at IndusInd Bank, and the failure of the Mumbai-based New India Cooperative Bank and Aviom India Housing Finance.

How were management changes effected at other banks?

Tamilnad Mercantile Bank: After MD & CEO S. Krishnan resigned in September 2023, citing “personal reasons”, the bank proposed three names as his successor, which the RBI rejected in April 2024. As Krishnan stepped down from the position in June 2024, the bank formed a committee to run the bank’s operations till Salee Sukumaran Nair was appointed the head of the bank in August 2024.

RBL Bank: In December 2021, MD and CEO Vishwavir Ahuja stepped down as the head of the bank as it faced rising losses and deteriorating asset quality. The RBI appointed chief general manager Yogesh Dayal as its representative on the board, following which R. Subramaniakumar was appointed the head of the bank in June 2022.

Lakshmi Vilas Bank: In September 2020, shareholders of the bank ousted seven directors, including the RBI-approved MD & CEO S. Sundar and auditors at the bank’s annual general meeting. The RBI first approved the constitution of a committee of three independent directors to manage the bank’s day-to-day operations. 

However, as the bank’s financial position continued to deteriorate and capital fell in the negative following two failed merger proposals (with Indiabulls Housing Finance and Clix Capital), the central bank in November 2020 seized control of the board, appointing T.N. Manoharan as the administrator. The central bank then forced the bank to merge with the local unit of Singapore’s largest lender, DBS Bank.

YES Bank: In March 2020, the RBI superseded the bank’s board, citing a serious deterioration in its financial position. It capped customer withdrawals at ₹50,000 and imposed restrictions on the bank’s operations while finalising the recast plan under the Yes Bank Reconstruction Scheme, 2020. 

The scheme involved a consortium of lenders led by State Bank of India infusing fresh capital into the bank and the appointment of Prashant Kumar as the bank’s administrator. Kumar was later appointed as the MD and CEO in July 2022.