By buld_online 
RBI Governor Sanjay Malhotra on Thursday said the accounting issues at IndusInd Bank are being closely monitored and are expected to be resolved shortly. “The IndusInd Bank issue should settle very soon. We will keep monitoring it. The bank has taken enough steps to improve the accounting issues and, on the whole, it is doing well,” Malhotra said at the press briefing after the MPC rate cut annoucement.
His remarks come amid scrutiny over discrepancies flagged in the bank’s loan classification and provisioning practices. While the RBI has not issued any formal directive yet, the central bank’s assurance suggests that corrective measures taken by the bank are showing positive results.
Following the comments, IndusInd Bank Ltd. saw its shares rise by 5% on Friday, June 6. At 2 PM, the shares were trading at Rs 824.25, up by 2.63%.
While talking about the overall banking system, RBI Governor Malhotra said that the situation is robust. Malhotra reassured that recent events at IndusInd Bank, while concerning, should not be a cause for excessive worry as long as they are isolated incidents. He noted that the bank has implemented necessary steps to enhance its accounting and internal processes, stating that overall, IndusInd Bank is performing well.
According to RBI Deputy Governor Swaminathan J, discrepancies highlighted by the regulator have been resolved in the Q4 results, following RBI directives. A forensic audit has been carried out to ensure accountability, with Swaminathan stating, “Each crisis provides valuable lessons for enhancing our supervisory framework.”
Swaminathan mentioned that the lender has been keeping the regulator informed about its succession planning, confirming that the process is proceeding as planned. He expressed optimism that the situation will be resolved promptly.
In March this year, IndusInd Bank reported a Rs 2,000 crore hit to its net worth due to issues in derivatives accounting. More accounting irregularities have since been discovered, leading to the initiation of the appointment process for a new leadership team, including a new Chief Executive Officer.
The Securities and Exchange Board of India (SEBI) has recently issued an order barring five key management personnel (KMPs), including former Managing Director and Chief Executive Officer Sumant Kathpalia and former Deputy CEO Arun Khurana, from engaging in securities trading. The SEBI order prohibits these individuals from conducting any buying, selling, or dealing in securities, both directly and indirectly, until further notice. Additionally, it imposes restrictions on any deposits or withdrawals from their bank accounts without prior approval from the regulator.
As per SEBI’s interim order, officials of the bank were found to have sold shares knowing about accounting discrepancies, which constituted unpublished price-sensitive information. This resulted in the officials avoiding losses amounting to Rs 19.78 crore, mainly from CEO Sumant Kathpalia and his deputy Arun Khurana.
The regulator’s preliminary findings revealed that the senior management had been aware of the accounting discrepancies as early as December 2023 and had internally recognized the significant impact. This information was cited from internal emails.