IndusInd accounting discrepancy: NFRA serves notice to auditors

.

India’s accounting and auditing standards regulator National Financial Reporting Authority (NFRA) has served notice to the existing and former auditors of IndusInd asking details related to the lender's audit, according to the Economic Times.

“Since there have been accounting irregularities in the IndusInd derivatives book over a period of time, NFRA has asked for the entire audit files for respective years from all the statutory auditors who had signed the accounts since 2017,” one person told ET.

The sources told that the watchdog will analyse the reports and evidence support the audit exercise and corroborate the bank’s claims on its financials.

Recently, SEBI said that the management of IndusInd Bank was aware of the derivatives discrepancies 15 months before they were disclosed.

SEBI's report revealed that the lender had noticed the incorrect accounting treatment of Derivative Contracts on September 26, 2023.

This was revealed after the bank, as per Reserve Bank of India's (RBI) master direction, created an inter-department team. The bank has revealed the numbers on March 10, 2025.

Meanwhile, Reserve Bank of India (RBI) Governor Sanjay Malhotra in the latest MPC meet on June 6 sought to calm concerns, stating that the issue will settle down soon and poses no systemic risk to the banking sector.

“The CEO has taken moral responsibility and stepped down, that should be good enough,” Malhotra said during the post-Monetary Policy Committee (MPC) press briefing.

“There is no systemic impact arising out of the issue,” he added.

The resignation of IndusInd Bank’s former MD and CEO Sumant Kathpalia comes against the backdrop of multiple regulatory concerns, including lapses in loan provisioning and asset classification, particularly within the bank’s microfinance and vehicle finance portfolios.

IndusInd had disclosed a Rs 1,529 crore impact from these discrepancies in March 2025. However, a forensic investigation by Grant Thornton revealed that the executives were aware of these issues as early as December 2023 but delayed public disclosure.