United we stand, divided we fall. That’s how things seem to be playing out at IndusInd Bank. Ever since the bank made it public that there’s at least a 2.35 percent hole on its December FY25 net worth due to deficiencies in accounting for certain derivatives, hell has literally broken loose.
While there are several questions which loom over the bank, there are two for which finding answers would not only be interesting, but direly necessary.
Is it just a discrepancy or something larger than that, and who should take responsibility for this?
IndusInd Bank is a classic case of a collective failure. Every single person is equally to be blamed. Starting from the treasury department to the finance department which signs off the treasury requests and senior executives who should have verified these documents. But it shouldn’t stop there. The bank's board of directors and not to mention the entire battery of auditors, whether statutory auditors, internal auditor or concurrent auditors and to an extent even the Reserve Bank of India for once again displaying deficiencies in its supervisory function, everyone has played a role in this failure.
But the ultimate responsibility vests with the chief executive officer. And here’s why.
The management in a call with investors earlier this month, said that the extent of impact on the financials is estimated at Rs 1,500 crore. Also, that it’s not a result of one year’s lapse or so. It is culmination of an improper practices followed over years, maybe seven years or more.
As the captain of the ship, was the chief executive officer oblivious to the problem and if indeed the problem goes back years, was it an act of oversight or are we missing something here?
Answers to these will be known when Grant Thornton Bharat reveals the finding of its forensic record. But having said that, the very fact that investigations are taking the shape of a forensic audit suggests that there are reasons to believe that there could be more than what has been revealed so far by the management.
Unfortunately, thanks to the management’s silence, and with new details emerging, the March 10 investor call alone isn't enough to assuage concerns. If anything, the call has only led to fresh doubts in the minds of investors and there aren’t any answers from the bank.
It’s time that the CEO of the bank addresses investor, if not the media, with some basic answers to these questions and reveals what the external investigation by PwC has resulted in.
Unfortunately, we also live in a world, where no matter who should be held responsible for the mistake, the person answerable for it circles back to the CEO. It has become a global practice, and may be a good one to improve the standards of governance.
The buck should stop with the CEO.
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