Context:
Sumant Kathpalia, MD & CEO of IndusInd Bank, resigned with immediate effect on Tuesday, citing “moral responsibility” for accounting lapses tied to a ₹2,000 crore loss from the bank’s derivatives portfolio. His resignation follows the submission of an investigative report by Grant Thornton, which was appointed to probe the discrepancies and examine the conduct of key executives.
Chain Reaction of Exits
- Deputy CEO Arun Khurana also resigned a day earlier in connection with the same issue.
- Kathpalia’s resignation letter referenced “acts of commission and omission” that had come to light, prompting his decision to step down.
Interim Management Plan
- The bank’s board has approached the Reserve Bank of India (RBI) for approval to form a “Committee of Executives” (COE) to manage CEO responsibilities temporarily.
- A similar model was adopted by Tamilnad Mercantile Bank last year during a CEO vacancy.
Derivatives Portfolio Lapses
- The irregularities in the derivatives portfolio were discovered on March 11, 2025.
- The issue has triggered internal reviews and regulatory scrutiny, affecting both leadership and investor confidence.
Market Reaction
- The bank’s share price has seen significant volatility since the disclosure of the derivatives discrepancies in March 2025.
- The departure of top management and the scale of financial impact have raised governance and risk oversight concerns.
Regulatory Outlook
- Sebi and RBI may initiate closer scrutiny of derivative exposures across the banking sector following this incident.
- Grant Thornton’s findings are expected to inform future compliance and governance reforms at IndusInd Bank.
