SEBI questions IndusInd Bank management why early disclosures were not made

IndusInd Bank

The Securities and Exchange Board of India (SEBI) is said to have asked the  management of IndusInd Bank as to why it did not disclose the lapses pertaining to  derivative instruments back in October 2024, when, according to the lender, it started investigating the matter.

“Sebi’s concern is that when the bank cannot with any certainty tell what is going to be the exact quantum of hit to its balance sheet even now, how is the present situation any different from what prevailed in October last year,” a senior official who didn’t want to be named said.

Emails sent to IndusInd Bank and SEBI seeking comments remained unanswered.

On March 10, the management of IndusInd Bank, led by CEO Sumant Kathpalia, deputy CEO and interim CFO Arun Khurana and investors relations head Indrajit Yadav, told investors that the lapses were with respect to treatment of certain foreign currency non-resident deposits. They came to the fore through an internal review last year. They indicated in the investor call that there would a 2.35 percent hit on net worth, which  “…is an internal number that we've arrived at, which is an approximate number, but not an exact number”.

“I think we started reviewing whatever our internal trade book was, and I think we started observing some discrepancies in our businesses, which was identified by September and October, and then we hired the external agency to start reviewing our business. And that is why we are comfortable that by March end or April early, we should be able to identify the gap, and it seems to be in line with what we are saying, but we want to be very sure about it right now, because it's still not validated completely,” Kathpalia said on the call.

Sources said these statements have not gone down well with the markets regulator.

“ When the bank started an internal review, it should have informed its investors. The amount of likely loss to financials could have been ascertained and disclosed as and when details surfaced,” said a senior executive who did not want to be identified.

According to SEBI officials, internal investigation and the quantum of likely losses should have been treated as two different aspects. “This (non-disclosure) works against the principle of good corporate governance,” said a source cited above.