In March 2025, IndusInd Bank, India’s fifth-largest private lender, faced significant leadership upheaval following the discovery of substantial accounting discrepancies. The Reserve Bank of India (RBI) has requested the resignation of the bank’s Chief Executive Officer and his deputy due to these lapses, pending the appointment of RBI-approved successors. ​

On March 10, IndusInd Bank disclosed that its derivatives portfolio was overvalued by approximately 2.35%, equating to around $175 million. This overvaluation resulted from non-compliant internal operations. In response, the bank has engaged external investigators to thoroughly examine the issue.

Regulatory Response and Leadership Transition

The RBI’s loss of confidence in the current leadership has prompted a call for an orderly transition to maintain depositor trust. The search for new leadership is underway, with expectations that candidates will come from outside the bank.Moody’s Ratings has placed the bank under review for a potential downgrade, citing weaknesses in risk management, compliance, and reporting. Consequently, IndusInd Bank’s shares have declined by over 30% this month.

Implications for Corporate Governance

This incident underscores the critical importance of robust accounting practices and effective internal controls within financial institutions. The RBI’s decisive action reflects a commitment to maintaining the integrity of India’s banking sector and protecting stakeholder interests.​

IndusInd Bank’s experience serves as a cautionary tale, highlighting the need for continuous vigilance and adherence to ethical standards in corporate governance.​

References:

-“India’s IndusInd Bank chiefs urged to step down, sources say; bank denies report” (www.reuters.com/business/finance/indusind-bank-chiefs-exit-within-months-after-accounting-lapses-sources-say-2025-03-21)