IndusInd Bank faces three senior level exits after ₹1,979 crore derivatives loss: Exclusive

IndusInd Bank Faces Potential Top-Level Shake-Up Over Derivatives Discrepancies

IndusInd Bank is reportedly facing a potential shake-up at the top, following the disclosure of significant discrepancies in its derivatives portfolio. Sources familiar with the matter exclusively told CNBC-TV18 that this situation could lead to some major changes within the bank.

Possible Executive Departures

At least three top executives may be stepping down in the coming months. This includes CEO Sumant Kathpalia and Deputy CEO Arun Khurana, who oversaw global markets, including the derivatives portfolio, according to a person directly involved in the process, as learned by CNBC-TV18.

Succession Planning Underway

The board is already engaged in succession planning, spurred by the Reserve Bank of India’s (RBI) decision to extend Kathpalia’s term by just one year. Sources say the RBI has requested the board to identify CEO successors and submit a shortlist of candidates at least four to six months before Kathpalia’s term concludes in March 2026.

In response to CNBC-TV18’s inquiry about potential CEO candidates and the reported departures, an IndusInd Bank spokesperson stated, “IndusInd Bank denies any claims of having received such a communication and the Bank does not comment on speculative reports regarding its management.”

The Financial Impact

PwC’s External Review

An external review conducted by PwC has estimated the negative impact of the derivatives issue at ₹1,979 crore. This financial hit estimate aligns with street expectations and is slightly below the bank’s internal assessment.

Initial Disclosure and Estimates

The Mumbai-based private lender initially flagged the issue on March 10, revealing discrepancies in derivative account balances accumulated over the past 5–7 years. The bank initially estimated the impact at 2.35% of its December 2024 net worth. In a March 11 interview with CNBC-TV18, CEO Sumant Kathpalia quantified the net post-tax impact at ₹1,520 crore, with a gross hit of around ₹1,970 crore.

Latest Disclosure

In its latest disclosure on Tuesday, April 15, IndusInd Bank reported the negative impact will be ₹1,979 crore, representing 2.27% of its net worth as of December 2024.

“The Bank will appropriately reflect the resultant impact in the financial statements for FY 2024–25 and continue to take suitable steps to augment internal controls relating to derivative accounting operations,” the statement read.

Regulatory Concerns and Timeline

Sources indicate to CNBC-TV18 that the ₹1,979 crore figure is broadly in line with the Reserve Bank of India’s own assessment of a ₹2,000 crore hit. However, the timeline and manner of disclosure have reportedly raised concerns with the regulator, potentially leading to senior-level exits.

CEO’s Explanation

During the March 11 interview, CEO Kathpalia mentioned that the issue was first discovered back in October 2024.

“We found this anomaly around October, and that is when we started our internal assessment and brought in an external agency. At the time, we didn’t know the full extent. We knew that two deals were being accounted incorrectly — but there were many more involved. Once we understood the impact, we called a board meeting and made the disclosure,” he explained.

Impact on Earnings

When questioned about the impact on earnings, he added, “The full year will not be a loss at all. And I think Q4 will also be a profit — even after factoring this in.”