Context:
IndusInd Bank, India’s fifth-largest private lender with a $63 billion balance sheet, has appointed Grant Thornton to conduct a forensic review into recent accounting lapses. The review will investigate potential fraud, internal misstatements, and assign accountability for lapses.
Background of the Issue
- On March 10, IndusInd disclosed that its derivatives portfolio was overvalued by 2.35% (approximately $175 million), due to noncompliant internal trades.
- This discrepancy violated Reserve Bank of India (RBI) guidelines.
- Despite the breach, RBI confirmed that IndusInd remains well-capitalised.
Forensic Review Scope
- According to sources, Grant Thornton’s investigation will:
- Identify the root cause of the accounting lapse.
- Check for evidence of fraudulent transactions.
- Review the accounting treatment of all derivative contracts.
- Assign accountability to individuals responsible.
- Assess any intentional internal misstatements.
Market Impact
- Since the March 10 disclosure, IndusInd’s shares have declined by 23.4%.
Regulatory Pressure
- Reuters reported that the RBI has advised IndusInd Bank’s CEO and deputy CEO to step down after replacements are found.
- IndusInd Bank, however, denied these claims, calling them “factually incorrect.”
The appointment of Grant Thornton marks a critical step in restoring investor confidence, ensuring transparency, and strengthening governance following one of the most significant accounting lapses in India’s banking sector.
