IndusInd Bank suspects fraud, certain employees played significant role in recent lapses

These reports have highlighted issues related to the accounting of derivative trades and unsubstantiated balances in the 'other assets' and 'other liabilities' accounts.

IndusInd Bank has said on May 21 that its Board suspects a fraud involving certain employees, who played a significant role in the lender's accounting and financial reporting, and has directed all necessary actions to be taken under applicable laws, including reporting the matter to regulatory authorities and investigative agencies.

The bank also intends to fix accountability for all individuals responsible for the lapses.

The bank said it has appropriately accounted for and reflected the financial impact of all discrepancies while finalizing its results, and has received investigation reports from an external professional firm and its Internal Audit Department (IAD). These reports have highlighted issues related to the accounting of derivative trades and unsubstantiated balances in the 'other assets' and 'other liabilities' accounts.

New Fraud Detected

Significantly, the bank's Internal Audit Department found on May 20 that Rs 172.58 crore had been incorrectly recorded as fee income in the Microfinance (MFI) business over three quarters ending the December quarter, which has since been reversed in the fourth quarter of FY25.

Bank Suspects KMP Involvement

The internal audit committee said, "On the basis of revaluation of the findings, there is likely involvement of senior bank officials including former Key Managerial Personnel (KMP) in overriding internal control across functions and concealment from the board and statutory auditors of the wrongful accounting practices adopted over such period if time, as indicated in the respective investigation and review reports."

Update on New CEO 

During the earnings call with analysts, IndusInd Bank said the board is in advance stages regarding the selection process, and will submit the recommendations of CEO names to the RBI by June 30.

What the Chairman Said

IndusInd Bank's chairman Sunil Mehta said the bank has taken extra steps which he believes should help avoiding such incidents in the future. The lender is also congnizant of the need to improve the governance culture, said Mehta, and the board is approaching all these aspects with utmost seriousness.

This is being updated