The Reserve Bank of India maybe uncomfortable with his leadership skills, IndusInd Bank chief executive officer Sumant Kathpalia said during an analyst call after the Reserve Bank of India approved only a year’s extension to his tenure. The board had approved a three-year extension for Kathpalia.
The bank stock was hammered on March 11 and was 25 percent down in the afternoon trade, a day after it reported discrepancies in accounting related to forex derivatives.
“I don’t know what the rationale is for them to give me one year (tenure). I think they are uncomfortable with the way my leadership skills with the bank have been, and I respect that. This is a litmus test for the bank and a succession point,” Kathpalia said during an investors call March 10. He was responding to analysts’ questions on why the regulator may have given him a shorter than expected extension.
Kathpalia also sought to assuage concerns arising out of bank’s disclosure of an accounting discrepancy in its forex derivatives portfolio.
IndusInd Bank said its net worth was expected to fall approximately Rs 1,530 crore, or 2.35 percent, as of December 31, 2024, due to discrepancies in its derivatives portfolio.
The bank engaged an external auditor to conduct an independent review of these discrepancies, with the report expected at the end of the month.
The bank’s growth agenda would not be hindered despite the change in leadership duration, Kathpalia said.
"I’ve been dedicated to the bank for a year and the board will review both internal and external candidates and whether that includes me or someone else is up to them," he said.
The RBI's decision to reappoint Kathpalia as IndusInd Bank's CEO for just a year follows growing concerns over leadership.
The regulator's move reflects ongoing issues, including the bank's exposure to the microfinance sector and its cautious stance regarding Kathpalia's ability to steer the bank through these challenges.
This one-year extension follows a two-year approval by the RBI in 2023, indicating that the regulator is still concerned about the bank’s performance.
IndusInd Bank has faced significant hurdles recently, including stress stemming from its exposure to the micro-finance sector.
At 1.29 pm, the IndusInd Bank stock was trading at Rs 673.80 on the National Stock Exchange, down 25.17 percent from the previous close.
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