The promoter of IndusInd Bank, Ashok Hinduja has assured during media interactions that the lender's financials remain healthy, and it will be fully supported should any capital requirement arise, after the derivatives hit shaved off nearly Rs 18,000 crore worth of market capitalisation on March 11.
Shares of one of India's largest private lenders crashed 26 percent after the bank reported discrepancies in its derivatives portfolio, resulting in an estimated impact of 2.35 percent on the net work of the bank. Ashok Hinduja told CNBC-TV18 that the bank can take care of the discrepancies that have emerged.
"Shareholders shouldn't panic. These are normal routine problems. I understand their concern is over why they were not informed earlier. Banking businesses are based on integrity and trust," he said.
Hinduja added that the promoter group has strong trust on the bank's board and management. "We have seen IndusInd Bank for the last 30 years. It has seen various problems. Those have been handled properly. This problem will also get resolved," he said while noting that the bank's financial numbers are very strong.
Hinduja noted that markets should have appreciated the transparency shown by the bank to reveal its problem. "This problem wasn't identified by anybody else - neither the auditor nor the regulator. It was the management which came out and brought the issue to attention," he said.
He added that the promoters are waiting for approval from the RBI to increase their stake in the bank from 15 percent to 26 percent. "As soon as we receive approval from the RBI, we will immediately inject capital into the bank as and when required," he said.
"If there is any further capital raise, the promoter is ready to inject. We are awaiting our approval which is in the process with the regulator. But as I understand from the financial numbers, the capital adequacy is no problem. Even in the current situation, the bank has a strong capital adequacy," he added during another media interaction.
Speaking about the bank's leadership, Hinduja said the promoters have full faith in the bank’s board. "Banks are always trusted for their integrity. As a promoter, we have full confidence. These errors and problems has come to various banks globally. The bank’s board and management is intelligent enough to handle it," he said.
The crash in the bank's stock was exacerbated after brokerages downgrading the stock following RBI's shorter-than-expected approval for the re-appointment of Kathpalia as MD & CEO of the private lender, only for one year.
During an internal review of processes relating to parts of its derivatives portfolio, IndusInd Bank estimated an adverse impact on its net worth as a result of some discrepancies in account balances, a company filing said on March 10.
This could potentially impact its profit by around Rs 1,500 crore, according to a person familiar with the matter. The final hit may be higher as an external review is underway, Moneycontrol had earlier reported.
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