Context:
IndusInd Bank (IIB) stock slipped 27%, at the NSE, to ₹656.80 on March 11 2025, a day after the bank flagged an adverse impact on its net worth due to a discrepancy on accounting for derivatives holdings. IIB estimated the impact to be at 2.35% of the bank’s net worth.
Key Highlights
- Stock Plunge
- IndusInd Bank’s shares crashed by 27%, which meant market value being wiped away worth ₹19,000 crores.
- Regulatory Action
- The RBI asked the bank to disclose its estimated losses, leading to panic among investors.
- Accounting Violation
- There are delays in rectifying discrepancies associated with derivatives. That raised concerns.
- Estimate of Losses
- The bank recorded a 2.35% hit to its net worth as of December 2024 due to derivative losses.
CEO’s Tenure and RBI’s Decision
- Extension of One Year
- An extension of only one year was given to CEO Sumant Kathpalia by RBI instead of the three years recommended by the board.
- In Expectation of New Leadership
- According to sources, RBI wants the bank to submit at least two candidates for CEO succession.
- End of Kathpalia’s Tenure
- March 23, 2026.
Impact on Investor and Market
- Delayed Classifying Loss
- Criticism was over the bank’s eventual classification to a derivative loss.
- Market Downgrades
- Downgrade notices have also flooded in for IndusInd Bank, thus tightening the pressure on its stock.
Next Steps
- Governance Practices
- RBI might review further governmental practices at IndusInd Bank.
- Stock Volatility
- Volatile conditions are cautionary for the investors amidst different political and risk management concerns.
- Findings of Audit by PwC India
- Findings should come before April 2025; results will be crucial for investor sentiment.
Source: BS
