IndusInd Bank in process to take steps to assess roles, fixing staff accountability

The search for the new CEO started after bank’s CEO Managing Director Sumant Kathpalia resigned on April 29, a day after the bank's deputy CEO Arun Khurana resigned.

IndusInd Bank's board is in the process of taking necessary steps to assess roles and responsibilities and fixing staff accountability as per internal code of conduct, said chairman Sunil Mehta.

He added that bank is approaching these aspects with seriousness, without fear or favor to anyone involved in the precipitation of the issue.

“The board has also taken a very serious view with respect to staff accountability across levels to reinforce the governance and compliance culture and is in the process of taking action for staff accountability,” Mehta said.

The board of the bank also said that they 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.

Significantly, the bank's 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.

Further, Mehta said bank will submit the recommendation of chief executive officers (CEO) names to the Reserve Bank of India (RBI) by June 30.

“The board is in advance stage in selection process and will submit the recommendations of CEO names to RBI,” Mehta said during the post earning conference call.

The search for the new CEO started after bank’s CEO Managing Director Sumant Kathpalia resigned on April 29, a day after the bank's deputy CEO Arun Khurana resigned.

After this, bank sought RBI's approval to constitute a committee of executives to discharge the duties, roles and responsibilities of the CEO of the Bank, for an interim period until a permanent CEO is appointed by the bank.

On April 30, RBI approved the establishment of a "Committee of Executives" to oversee operations during the leadership transition period.

The newly formed committee comprised two senior leaders — Soumitra Sen, who currently heads the Consumer Banking division, and Anil Rao, the bank's Chief Administrative Officer.