INDUSINDBK

Adds details in paragraphs 4-5, background in paragraphs 7-8 and analyst comments in paragraphs 6, 10-12; updates shares

Aug 5 (Reuters) - India's IndusInd Bank INBK.NS jumped as much as 5.4% on Tuesday after naming Rajiv Anand as CEO, a move that analysts say could pave the way for a turnaround after leadership turmoil amid accounting lapses.

The stock was the top gainer on the Nifty Bank .NSEBANK and Nifty Private Bank .NIFPVTBNK indexes, which were trading 0.3% and 0.1% lower, respectively.

It was also the biggest gainer on the benchmark Nifty 50 .NSEI, which was down 0.5%.

The lender named Anand as CEO following approval by the Reserve Bank of India, which has final authority on senior banking appointments.

Anand, a veteran banker, is currently deputy managing director at Axis Bank AXBK.NS and has held key management positions at leading global financial institutions.

IndusInd Bank took a $230 million hit in the year ended March 31 due to misaccounting in internal derivative trades, prompting the resignations of CEO Sumant Kathpalia and deputy Arun Khurana in April.

In the interim, the bank has been steered by the board and two senior officials.

The stock, which has lost 8.5% of its value since the disclosure of the accounting discrepancies in March, was last trading 2.5% higher at 823.15 rupees.

Citi analysts said Anand's 35-plus years of banking experience and track record in scaling retail and corporate businesses are key positives.

The appointment of a seasoned private banker has raised hopes of an early turnaround, said Emkay Global.

Reorganising the bank's top management may be among Anand's initial top priorities, Jefferies analysts said, reiterating a "buy" rating on the stock.

The stock carries an average "sell" rating, with a median price target of 750 rupees, per data compiled by LSEG.

Despite Tuesday's gains, IndusInd Bank is the worst year-to-date performer on both the Nifty Bank and Private Bank indexes, down 14%.

(Reporting by Kashish Tandon in Bengaluru; Editing by Sonia Cheema)

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July 29 (Reuters) - ** India's IndusInd Bank INBK.NS swung to profit in Q1 on lower operational expenses, however, its asset quality worsened and provisions for bad loans rose

** Shares trading 1% higher at 809.50 rupees

CAUTION STILL WARRANTED

** Emkay Global ("reduce," PT: 700 rupees) says even though management believes asset quality will gradually improve as microfinance stress eases, caution is warranted amid rising stress in commercial vehicles portfolio across lenders and given potential risk of further cleanup by new management

** UBS ("sell," PT: 600 rupees) says INBK had another weak quarter, adding that they expect loan growth to remain subdued at 7% for the current fiscal

** JP Morgan ("underweight," PT: 550 rupees) says while INBK's profitability recovered from record loss in Q4, core trends suggest limited scope for sustained improvement in returns

** Investec ("sell," PT: 650 rupees) says INBK has a tough climb ahead on profitability, cuts FY26 and FY27 EPS estimates by 15% and 6%

(Reporting by Kashish Tandon in Bengaluru)

((kashish.tandon@thomsonreuters.com; Mobile: +91 8800437922))

BENGALURU, July 28 (Reuters) - India's IndusInd Bank INBK.NS reported a drop in first quarter profit on Monday, hurt by decline in loans and rise in provisions for potential bad loans.

The country's fifth largest private lender by assets said its profit fell 68% to 6.84 billion rupees ($78.93 million) for the quarter ended June 30.

In the previous quarter, IndusInd had reported its biggest-ever quarterly loss, as it took a $230 million hit to its accounts in the year ended March 31 due to years of misaccounting of internal derivative trades.

($1 = 86.6600 Indian rupees)

(Reporting by Nishit Navin and Ashwin Manikandan; Editing by Mrigank Dhaniwala)

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July 25 (Reuters) - Indusind Bank Ltd INBK.NS:

• INDUSIND BANK LTD - CHRO ZUBIN MODY RESIGNS FROM INDUSIND BANK

Source text: ID:nBSE77mxJq

Further company coverage: INBK.NS

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July 18 (Reuters) - IndusInd Bank INBK.NS will consider a proposal to raise funds by issuing long-term bonds at its board meeting on July 23, the Indian lender said on Friday.

The board will consider issuing the bonds on a private placement basis and whether to increase capital through depository receipts and qualified institutional placements.

The bank took a $230 million hit in the fiscal year ended March 31 due to years of misaccounting of internal derivative trades, prompting the resignations of CEO Sumant Kathpalia and deputy Arun Khurana in April.

It has shortlisted senior bankers from three other financial organizations, including HDFC Bank HDBK.NS, for the position of CEO, Reuters reported in June.

(Reporting by Ananta Agarwal in Bengaluru; Editing by Sahal Muhammed)

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July 4 (Reuters) - Indusind Bank Ltd INBK.NS:

• INDUSIND BANK LTD - NET ADVANCES DECLINED 3.9% YOY TO 3.34 TRILLION RUPEES AS OF JUNE 30

• INDUSIND BANK LTD - DEPOSITS DECREASED 0.3% YOY TO 3.97 TRILLION RUPEES AS OF JUNE 30

Source text: ID:nNSE5NnF0T

Further company coverage: INBK.NS

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** Macquarie downgrades private lender IndusInd Bank INBK.NS by two notches to "underperform" from "outperform", retains PT of 650 rupees

** Brokerage expects INBK to reduce the size of its microfinance portfolio post discovery of fraud and governance issues

** INBK will also find it difficult to build its asset base and grow its retail liability franchise - Macquarie

** Avg stock rating by 38 analysts is "sell"; median PT is 725 rupees - data compiled by LSEG

** Stock trading flat on the day at 860.10 rupees

** INBK down 4% since March 10 when it first disclosed accounting lapses

** YTD, INBK down 10.4%, Nifty Financials .NIFTYFIN up 14.5%

(Reporting by Kashish Tandon in Bengaluru)

(([email protected]))

** Shares of private lender IndusInd Bank INBK.NS fall as much as 2.74% to 855 rupees

** Goldman Sachs downgrades INBK to "sell" from "neutral", citing likely structurally weak franchise, weaker growth in profit and returns in second half of fiscal 2026 and 2027

** Sees potential loss in market share in its key loan portfolios as well as in deposits, and slowdown in revenue growth

** Cuts earnings-per-share estimates by 25% and 17% for FY2026 and FY2027, respectively, to reflect margin pressure and elevated funding costs

** Sees INBK as value trap for investors, estimating about 18% drop in shares in next 12 months

** Average rating of 38 analysts tracking INBK is "hold"; median price target 725 rupees, according to data compiled by LSEG

** INBK down 8.4% in 2025 so far, underperforming the 8.1% rise in benchmark Nifty 50 index .NSEI, exchange data shows

(Reporting by Bharath Rajeswaran in Bengaluru)

(([email protected]; +91 9769003463;))

By Siddhi Nayak

MUMBAI, June 30 (Reuters) - India's IndusInd Bank INBK.NS has shortlisted three senior bankers - Rajiv Anand, Rahul Shukla, and Anup Saha - for the position of CEO and submitted their names to the central bank for approval, two sources told Reuters.

IndusInd Bank took a $230 million hit in the year ended March 31 due to years of misaccounting of internal derivative trades, prompting the resignations of CEO Sumant Kathpalia and deputy Arun Khurana in April.

The Reserve Bank of India (RBI), which has the final say in top appointments at banks, had asked for names of potential replacements by June 30.

The board has suggested a three-year term for the chief executive, one of the sources said.

The sources declined to be identified as they were not authorised to speak with the media.

IndusInd Bank, RBI and Saha did not reply to a Reuters email seeking comment. Anand and Shukla did not reply to WhatsApp messages.

Anand, a veteran banker, is currently the deputy managing director at private lender Axis Bank, and has held key management positions at leading global financial institutions.

Shukla, who is currently on sabbatical, is group head at India's biggest private lender HDFC Bank, with over 30 years of work experience.

Saha is the managing director of Indian non-bank lender Bajaj Finance and has served for 25 years in the financial services industry.

"Rajiv Anand's name has been given as first priority by the board, given his reputation and the experience he brings to the table," one of the sources said.

Shares of IndusInd Bank were trading 0.6% higher on Monday and are down 10% so far in 2025.

(Reporting by Siddhi Nayak; Editing by Saad Sayeed)

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** Shares of IndusInd Bank INBK.NS rise 2.9% to 860 rupees

** Rahul Shukla, HDFC Bank's HDBK.NS group head of commercial and rural banking; Anup Saha, Bajaj Finance BJFN.NS MD, and Rajiv Anand, deputy MD at Axis Bank AXBK.NS, are in the running for IndusInd Bank's CEO position, CNBC TV-18 reports, citing sources

** Report says INBK board discussed potential CEO names unofficially with RBI, but is yet to submit list

** IndusInd Bank did not immediately respond to a Reuters request for comment

** INBK shares were up ~2% before the news, rose as much as 5.4% after the report

** INBK has dropped ~5% since March 10, when it disclosed incorrect accounting of internal derivative trades

** Lender currently does not have a CEO

** YTD, stock down over 10%; Nifty bank .NSEBANK up ~13%

(Reporting by Anuran Sadhu in Bengaluru)

(([email protected]; +91 8697274436;))

** Shares of IndusInd Bank INBK.NS up 5.3% at 852 rupees after Nomura upgrades private lender to "buy" from "neutral", raises target price to 1,050 rupees from 700 rupees
** Nomura says bank has addressed accounting issues with a 53 bln rupees one-time hit in Q4FY25 and is now positioned for recovery
** Brokerage sees bank's return on asset improving to 1.1% from present 0.5% and return on equity to 9.6% by FY28 from present 4%, aided by stronger retail franchise, lower credit costs, and stable capital base
** Commitment from board to improve governance, ongoing search for a new leadership and clear intent to "start FY26F on a clean slate" are crucial positive signs - Nomura
** Brokerage says current valuations look attractive
** Adds that RBI’s support and upcoming CEO appointment could further boost investor confidence
** INBK down 10.9% YTD vs 10% gain in Nifty bank index .NSEBANK

(Reporting by Sethuraman NR in Bengaluru)

(([email protected]; (+91 9945291420); Reuters Messaging: [email protected] ))

** IndusInd Bank shares INBK.NS climb 4.4% to 838.45 rupees

** Deputy governor Swaminathan says bank has already accomplished audits, accounted for discrepancies and examined accounting fraud

** Adds, things should settle down at the lender soon and be back to normal

** RBI chief Sanjay Malhotra says private bank has taken steps to improve accounting, other practices; adds "bank is doing well"

** INBK stock has dropped 7% since it disclosed incorrect accounting of internal derivative trades in the company, on March 10

** YTD, stock down nearly 13%; Nifty bank index .NSEBANK up 11%

(Reporting by Manvi Pant in Bengaluru)

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May 20 (Reuters) - Indusind Bank Ltd INBK.NS:

• INDUSIND BANK INKS MOU WITH DPIIT

Further company coverage: INBK.NS

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May 19 (Reuters) - Indusind Bank Ltd INBK.NS:

• INDUSIND BANK SIGNS MOU WITH AIC STPINEXT

• TO DELIVER TAILORED BANKING SOLUTIONS TO SUPPORT EARLY-STAGE START-UPS

Source text: [ID:]

Further company coverage: INBK.NS

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May 15 (Reuters) - IndusInd Bank said on Thursday that an internal audit of its microfinance business showed it had incorrectly recorded 6.74 billion rupees ($79 million) as interest for three quarters of fiscal 2025.

The amount was fully reversed on January 10, 2025, the bank said in an exchange filing.

($1 = 85.4620 Indian rupees)

(Reporting by Nandan Mandayam in Bengaluru; Editing by Anil D'Silva)

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May 9 (Reuters) - IndusInd Bank Ltd INBK.NS:

• REPORT DELIVERED TO BANK ON APRIL 26 IDENTIFIED CERTAIN ASPECTS WHICH MAY REQUIRE DETERMINATION FROM "INSIDER TRADING PERSPECTIVE"

• BANK IS EXAMINING FINDINGS IN REPORT

• BASED ON OUTCOME OF EXAMINATION, BANK WILL TAKE NECESSARY STEPS UNDER APPLICABLE LAW

Source text: ID:nBSE9KV681

Further company coverage: INBK.NS

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By Aditya Kalra and Siddhi Nayak

NEW DELHI/MUMBAI, May 8 (Reuters) - A forensic review by audit and advisory firm Grant Thornton found two executives of India's IndusInd Bank traded in its shares while they were aware of accounting lapses at the bank but before those were made public, a document reviewed by Reuters showed.

India's fifth-largest private sector bank disclosed in March that years of incorrect accounting of internal derivative trades have led to a $230 million hole in its $60.8 billion balance sheet. Its CEO Sumant Kathpalia and deputy Arun Khurana stepped down last month.

Kathpalia said in his resignation letter he was taking "moral responsibility", while Khurana resigned citing "unfortunate developments". Neither explicitly admitted or denied any wrongdoing.

Grant Thornton, which the bank hired to conduct an independent forensic investigation, found as a result of its review of internal accounts and communications that there were indications Kathpalia and Khurana traded in shares of IndusInd "during a period of seeming non-disclosure," a summary of the findings showed.

"Considering that employees had knowledge of incorrect accounting and/or its impact but traded in shares of IBL during the period may also require a determination from an insider trading perspective," the summary said.

Kathpalia and Khurana did not respond to repeated calls and text messages requesting comment. The document did not name any other executives in the context of share trading, but it mentioned one other executive's handling of the information about the accounting lapses.

India's markets regulator SEBI, IndusInd Bank and Grant Thornton also did not respond to requests for comment.

The summary of Grant Thornton's findings did not disclose further details of the share trading or offer any conclusions about its nature.

A Reuters review of employee trading data provided by India's National Stock Exchange showed that between March 2024 and IndusInd Bank's March 10, 2025 disclosure, then CEO Kathpalia sold the bank's shares worth 283.48 million rupees ($3.3 million) and bought 102.71 million rupees' worth of shares. His then deputy, Khurana, sold 320.72 million Indian rupees worth of IndusInd Bank shares during that period.

The summary document also noted "less than adequate" emphasis on "accounting analysis and rigour", has not been made public.

Two people familiar with the matter said Grant Thornton has shared the report with the bank and the Reserve Bank of India, which oversees the banking industry.

IndusInd Bank said in March that following an internal review it expected a 2.35% hit to its net worth because of internal derivatives trades that did not comply with central bank rules.

Reuters reported later that month that it hired Grant Thornton to investigate the accounting lapses and the bank itself said in an April 27 filing that a report by "independent professional firm" had identified "incorrect accounting" and it was "taking necessary steps to fix accountability."

The summary of Grant Thornton's findings said many finance and treasury executives at the bank were aware of the accounting issues and the Market Risk team flagged its concerns way back in May 2015.

"We also note other emails and communications that indicate suggestions to delete pertinent communications as well as suppressing sharing of information on this aspect," the document said, without naming any individuals in that context.

Problems at the bank were amplified by "relatively manual accounting and computations", missing or inadequate supporting documentation and inadequate standard operating procedures, it said.

IndusInd Bank shares, which tumbled after the March 10 disclosure, are now down 8% following the central bank's assurances that the lender was well capitalised and its financial position remained satisfactory.

The central bank has also approved the establishment of a committee of executives to oversee its operations in the absence of a new CEO.

(Reporting by Aditya Kalra and Siddhi Nayak
Editing by Tomasz Janowski)

((Email: [email protected]; X: @adityakalra;))

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, April 30 (Reuters Breakingviews) - Casualties are piling up in India's war for bank deposits. The CEO of $8 billion IndusInd Bank INBK.NS stepped down on Tuesday after accounting and lending woes nixed almost half its market value. The shambles is the most high-profile fallout of the banking industry's intense fight for low-cost funds in the country that has wrong-footed executives, shareholders and watchdogs.

Sumant Kathpalia is trying to distance himself from the mess caused on his watch, which includes rising losses on microfinance loans. He is resigning, he said, to take "moral responsibility" for a derivatives lapse that shaved 2.27% off the bank's net worth when it came to light a month ago. His deputy also stepped down on Monday.

The Reserve Bank of India had insisted on the exits, Reuters reported. But the regulator was initially intending for the lender to find replacements first, which is why it approved a one-year extension to Kathpalia's tenure just last month.

The saga bears the markers of perverse incentives. At the heart of the controversy is IndusInd's long-term foreign currency deposits, which it converted to rupees to fund loan growth without fully accounting for mark-to-market losses. The practice, which stretched back at least six years, effectively inflated profits.

The RBI ushered in new accounting rules for internal derivatives trades in April 2024. Nonetheless, repeated instances of governance crises and RBI action at private lenders from Yes Bank YESB.NS to RBL Bank RATB.NS point to the limits of regulatory effectiveness in an environment of fierce competition.

India's 33 banks are locked in a battle for low-cost deposits. Private lenders, the product of India's 1990s liberalisation, have to compete with state-owned peers which are generally regarded as safer.

There's a newer rival, too: Indians' blooming hopes of making more money by putting their cash into stocks and mutual funds. Bank deposits accounted for 44% of overall household financial assets in March 2024, down from 56% in 2020. The drop, coupled with steady loan growth, has driven banks to increasingly tap short-term debt and attracted health warnings from the RBI.

Management overhauls can hold out hope of a fresh start. But the war for deposits may yet claim more casualties.

Follow @ShritamaBose on X

CONTEXT NEWS

IndusInd Bank on April 29 said its Managing Director & CEO Sumant Kathpalia had stepped down from his role. Kathpalia claimed "moral responsibility" in his resignation letter for an accounting lapse that shaved 2.27% off the bank's net worth.

With the Reserve Bank of India's approval, the lender's board has set up a committee of executives to oversee its operations either for three months from the date of Kathpalia's exit or until a new chief assumes charge, whichever comes first, IndusInd said on April 30.

(Editing by Antony Currie and Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

Updates with details throughout

MUMBAI/BENGALURU April 28 (Reuters) - India's IndusInd Bank INBK.NS on Monday announced the resignation of deputy CEO Arun Khurana, weeks after the private lender disclosed accounting lapses in its derivatives portfolio that triggered a rout in its shares .

In light of the recent accounting issues related to internal derivative trades , "I having oversight of the Treasury Front office function, as the whole time director, Deputy CEO and a part of senior management of the bank, hereby resign, effective immediately," Khurana wrote in a letter to IndusInd Bank's board that was included in a stock market filing.

IndusInd, India's fifth-largest private lender with a balance sheet of $63 billion, said on Sunday it would take a $229.56 million hit to its accounts for the financial year ended March 31, 2025 because of the incorrect treatment of derivatives going back several years.

Based on the findings of an external agency's probe, IndusInd has estimated an impact of 2.27% on its net worth as of December 2024.

Khurana headed the global markets division of the bank, which included the derivatives portfolio.

IndusInd shares have fallen nearly 8% since March 10, when the lender first disclosed the impact on its net worth from the discrepancies.

Last week, IndusInd named Santosh Kumar as its deputy CFO. Kumar will head the finance and accounts functions till IndusInd appoints a full-time CFO.

The Reserve Bank of India had urged CEO Sumant Kathpalia and Khurana to step down following the accounting lapses, as soon as replacements were found and approved by the central bank, Reuters reported last month.

The bank is due to report earnings for the full financial year before May 15, but is yet to disclose the date for the release.

(Reporting by Siddhi Nayak in Mumbai and Ananta Agarwal in Bengaluru; Editing by Anil D'Silva)

(([email protected];))

NEW DELHI, April 27 (Reuters) - IndusInd Bank INBK.NS, India's fifth-largest private lender by assets, said on Sunday it would take a $229.56 million hit to its accounts for the financial year ended March 31, 2025 because of the incorrect treatment of derivatives going back several years.

The bank is due to report earnings for the full financial year before May 15, but is yet to disclose the date for the release.

The likely hit is similar to what was disclosed by the bank in April but has been finalised after internal and external reviews of the accounting discrepancy in its currency derivatives book, dating back six years.

On Sunday, the Indian lender said the external probe had concluded and responsibility was being fixed on the people responsible for the lapses.

“The Board is taking necessary steps to fix accountability of the persons responsible for these lapses and re-align roles and responsibilities of senior management,” it added, without giving details.

It added that internal derivative trades had been discontinued by the company since April. The bank's stock closed 0.32% higher on Friday.

(Reporting by Ira Dugal; Writing by Arpan Chaturvedi; Editing by David Holmes)

(([email protected];))

** Shares of IndusInd Bank Ltd INBK.NS rise 3.2% to 819.50 rupees

** About 355,000 shares change hands in four separate block deals, between 819.05 rupees and 835.35 rupees - National Stock Exchange data

** Block deals at a premium to previous closing price of 794.20 rupees

** Private sector bank top gainer on blue-chip Nifty 50 .NSEI index

** Analysts tracking stock rate it "hold" on avg - data compiled by LSEG

** Stock down ~9% since it reported accounting lapse on March 10 that led to a net worth hit

(Reporting by Nandan Mandayam in Bengaluru)

(([email protected]; Mobile: +91 9591011727;))

April 22 (Reuters) - Indusind Bank Ltd INBK.NS:

• CLARIFIES NO ENGAGEMENT OF EY FOR FORENSIC AUDIT

• INTERNAL AUDIT DEPARTMENT REVIEWING BANK'S MFI BUSINESS

• ENGAGED WITH EY TO ASSIST IN RECORD REVIEW

Source text: ID:nBSE1T9t06

Further company coverage: INBK.NS

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** Shares of IndusInd Bank Ltd INBK.NS jump 5.7% to 840.20 rupees

** Private lender on Thursday appointed Santosh Kumar as its deputy CFO after deputy CEO Arun Khurana's term as finance chief ended

** Reserve Bank of India had urged Khurana to step down following the accounting lapses, Reuters reported

** INBK at its highest since March 10, when bank first reported discrepancies in its accounts relating to derivative deals that led to a net worth hit

** INBK top gainer on Nifty 50 .NSEI which is up 0.9%

** Analysts tracking stock rate it "hold" on avg - data compiled by LSEG

** Stock narrows losses to 7.1% from ~12% , when bank disclosed accounting lapses

(Reporting by Nandan Mandayam in Bengaluru)

(([email protected]; Mobile: +91 9591011727;))

** Shares of IndusInd Bank INBK.NS rise nearly 1% to 795 rupees

** Shares up 14% for the week; post best week since late July, 2022

** Earlier this week, co said it estimated hit to its net worth at 2.27% from derivatives accounting lapse, lower than earlier assessment of a 2.35%

** INBK also the top weekly gainer on the Nifty 50 index.NSEI, which is up 4.5% for the week

** INBK down 18% so far in 2025 vs a 1% gain in the Nifty 50 index

(Reporitng by Nishit Navin)

(([email protected];))

** Shares of private sector lender IndusInd Bank INBK.NS jump 4.2% to 767 rupees

** Stock among top gainers on benchmark Nifty 50 .NSEI which is little changed

** Co says it estimates hit to its net worth at 2.27%, lower than earlier assessment of a 2.35% hit

** Co says an external agency's report confirmed the bank's earlier finding of discrepancies in its accounts relating to derivative deals

** Stock jumped 6.7% on Tuesday, extending gains over last two days to 11%, set for their biggest two-day jump since February 2022

** Macquarie retains "outperform" rating, says the findings are "incrementally positive in the near term as impact of discrepancies will be limited to what was ascertained earlier"

** While 37 analysts tracking stock rate it "buy" on avg, INBK has most "hold" ratings in at least two years - data compiled by LSEG

** Stock trims losses since flagging net worth hit last month to about 15%

(Reporting by Nandan Mandayam in Bengaluru)

(([email protected]; Mobile: +91 9591011727;))

Recasts, updates with details throughout

April 15 (Reuters) - India's IndusInd Bank INBK.NS said on Tuesday it estimates a 2.27% hit to its net worth as of December-end after an external agency found discrepancies in its accounts relating to derivative deals.

The bank reported last month it had discovered an accounting discrepancy in the way it booked currency derivatives stretching back at least six years, with an estimated impact of $175 million.

It had also appointed an external agency to independently review and validate the internal findings.

In its report, the external agency has quantified the discrepancies at 19.79 billion rupees ($230.92 million) as of June 30.

Based on this, the bank reassessed its earlier estimated hit of 2.35% as of December-end on a post-tax basis, IndusInd said in a stock exchange filing.

IndusInd said it will appropriately reflect the resultant impact in the financial statements for 2024-25 and take "suitable steps to augment the internal controls relating to the derivative accounting operations."

Despite the accounting lapse, the bank expects to report a profit for the fourth quarter and fiscal 2025, its CEO told news channel CNBC-TV18 in March.

However, the Reserve Bank of India, the country's central bank, has asked IndusInd's CEO and his deputy to step down as soon as replacements are found and approved by it, Reuters reported last month, citing sources.

IndusInd has denied any such push from the RBI.

The discrepancies in derivative trades have also led the bank to appoint Grant Thornton to conduct a forensic review, the report of which is currently awaited.

IndusInd, which is India's fifth-largest private lender with a 5.4-trillion rupee balance sheet, has been grappling with elevated bad loans in the microfinance segment, leading to a drop in profit in the last two quarters.

IndusInd's shares have fallen 18.3% since March 10, when the lender first disclosed the impact on its net worth from the discrepancies.

($1 = 85.7000 Indian rupees)

(Reporting by Kashish Tandon in Bengaluru and Siddhi Nayak in Mumbai; Editing by Shreya Biswas)

(([email protected]; 8800437922;))

By Siddhi Nayak and Swati Bhat

MUMBAI, April 4 (Reuters) - IndusInd Bank ignored established Indian derivative accounting practices for years as it chased profit growth, resulting in a $175 million balance-sheet hole and the biggest crisis for the lender in its three-decade history, multiple sources said.

Still, the 2.35% shortfall in the net worth of India's fifth-biggest private sector lender INBK.NS may not have come to light last month had the rupee not sharply slumped recently, said the sources.

IndusInd disclosed in March accounting discrepancies in its derivatives portfolio whose impact roughly equated to an entire quarter's profits and sparked the loss of about one-fourth of its market value.

In the aftermath, the country's central bank, the Reserve Bank of India (RBI), has asked the CEO of the bank and his deputy to step down as soon as replacements are found and approved by it, Reuters reported last month, citing sources. IndusInd has denied any such push from the RBI.

While India is not new to crises at banks, the IndusInd debacle underscores the risks to them from complex derivative transactions and to the financial system from sudden and sharp moves in the currency, while also raising questions about the robustness of bank board controls.

Reuters pieced together the sequence of events that led to IndusInd's crisis by speaking to more than a dozen people, most of whom had direct knowledge of the matter or were aware of the RBI's thinking.

At the heart of the controversy is the bank's long-term foreign currency deposits, which include funds denominated in U.S. dollars and the Japanese yen. IndusInd's long-term foreign borrowings stood at 28% of its total borrowings of 500.87 billion rupees ($5.9 billion) as of end-December.

The bank converted these foreign currency deposits into rupees to fund its loan growth in a highly competitive Indian banking sector, managing the interest rate and currency risks through hedging, said the sources.

But while its rivals also sought foreign currency deposits to fund loan growth, IndusInd's different accounting treatment of the hedging transactions inflated its income and hid its losses, said the sources.

IndusInd, whose largest shareholder is the UK-based billionaire Hinduja family, did not respond to a Reuters request for comment.

MARKED-TO-MARKET

Over the last five to seven years, the bank's asset-liability desk hedged the foreign currency deposits that it swapped into rupees internally with the treasury desk to mitigate the interest rate risk, while the latter hedged the foreign currency risk with an external counterparty, several sources said.

The external trades were marked-to-market, meaning they reflected real-time market movements and were mostly profitable for the bank, adding to its trading gains, multiple sources said.

But the internal trades were not being marked-to-market and that caused losses to remain concealed and not be reflected on the bank's profit and loss statement until matters came to a head in March, said four sources.

The derivative accounting practices escaped regulatory checks as the complexities of the trades and the valuation models made it difficult for regulators and the lender's auditors to detect these lapses, three of the sources said.

IndusInd's statutory auditors for those years, MSKA and Associates and M.P. Chitale and Co, did not respond to requests for comment.

Things began to change after the RBI barred inter-departmental derivatives trading at banks from April 1 last year. It did not give a reason for the change in the rules.

But by then, the size of the positions at IndusInd without adequate mark-to-market had ballooned and those had to be unwound, one of the sources said.

In September 2024, the bank's then chief financial officer, Gobind Jain, approached CEO Sumant Kathpalia to flag "suspicious transactions" in the derivative trades, according to two of the sources.

Jain told Kathpalia that the transactions did not meet the new accounting guidelines laid out by the RBI and that all these internal trades should be unwound, said the two sources. Jain also suggested appointing an external agency to unearth the discrepancies in transactions, they added.

Soon after that, the bank approached the RBI to notify it of the discrepancies and was verbally told to hire an external auditor, a source aware of the central bank's thinking said. The RBI did not respond to a Reuters email seeking comment.

RUPEE FALL STINGS

IndusInd's management appointed global audit firm PwC to conduct a probe into possible accounting lapses, which started in December, added the source. However, no public disclosures about the discrepancies or the probe were made at that time.

A sharp fall in the rupee since then, as a result of a spike in global markets volatility induced by U.S. President Donald Trump's trade war, made the financial hit to the balance sheet untenable and eventually led to the bank's disclosure, three of the sources said.

Between September and February, the rupee slumped 4.2% against the dollar and 1.6% against the yen.

That compounded the mark-to-market losses as the bank had to repurchase the foreign currency at much higher rates than it had anticipated, the three sources said.

IndusInd is not under threat of a collapse, with the RBI saying last month the financial position of the bank remains satisfactory and that it is well-capitalised. And the Hinduja family has said it stands ready to infuse capital into the bank.

But investigations into the accounting lapses at IndusInd have now been widened, with accounting and consulting firm Grant Thornton doing a wider audit, including to determine whether there was fraud or intentional misstatement of accounts.

($1 = 85.2030 Indian rupees)

(Reporting by Siddhi Nayak and Swati Bhat in Mumbai; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)

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March 27 (Reuters) - India's market regulator is investigating possible insider trading among senior officials of IndusInd Bank INBK.NS amid significant accounting lapses by the lender, the Economic Times reported on Thursday.

The Mumbai-based lender reported earlier this month that it had discovered accounting discrepancies in the way it booked currency derivatives, going back at least six years, with an estimated impact of about $175 million.

The Securities and Exchange Board of India (SEBI) has sought information about trades executed by five senior officials while they were in possession of unpublished price-sensitive information of IndusInd, the newspaper said, citing two people close to the development.

SEBI is also examining whether IndusInd violated its disclosure norms, the report said.

The lender did not immediately respond to a Reuters' request for comment.

It has appointed an independent firm to conduct an investigation into the lapses and the discrepancies, which have also led to concerns over governance at the bank. Reuters reported earlier this week that IndusInd had appointed Grant Thornton to conduct the review.

Shares of IndusInd have fallen over 27% since it first announced the lapses on March 10.

(Reporting by Manvi Pant in Bengaluru; Editing by Sonia Cheema)

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By Siddhi Nayak and Dharamraj Dhutia

MUMBAI, March 26 (Reuters) - India's IndusInd Bank INBK.NS garnered $2 billion in higher-cost bulk deposits in March, its biggest monthly haul in at least two years, as the lender shored up its funding base after disclosing accounting lapses.

The country's fifth-largest private sector bank flagged earlier in the month a $175 million hole in its balance sheet, citing accounting discrepancies in its derivatives portfolio.

The discrepancies have led to concerns over governance at the bank and the appointment of Grant Thornton to conduct a forensic review into the accounting lapses. The bank's shares are down nearly 27% since the lender disclosed the matter.

Publicly available data from India's clearing house showed that IndusInd Bank raised 165.50 billion rupees ($1.93 billion) in March through the sale of certificates of deposits (CDs) maturing in three months to one year, with about 85% of that raised after the lapses were disclosed.

It paid 7.90% on its one-year CDs this month, 20 basis points higher than what it had paid for similar deposits in February, the data showed.

"By issuing CDs, the bank may want to shore up its overall deposit base and maintain higher liquidity to counter uncertainty on deposit withdrawals," Karthik Srinivasan, senior vice president & group head at rating agency ICRA, said.

"It is also a confidence building exercise to ensure that the bank's liquidity remains strong."

An IndusInd spokesperson said the bank "evaluates various sources of funds depending on its asset and liability requirements" and that it has a "healthy liquidity position" with a focus on retail deposit mobilisation.

The Reserve Bank of India (RBI), the country's central bank, said this month IndusInd Bank was well capitalised and its financial position remained "satisfactory".

LESS PREFERRED OPTION

For lenders in India, bulk deposits - those that are more than 30 million rupees - are generally less preferable to retail deposits as they cost around 20-150 basis points more.

But IndusInd Bank raised through bulk deposits in March nearly 3.5 times what it raised in the preceding month, marking its highest haul since at least April 2023, the clearing house data showed.

The on-month jump in such deposits raised by IndusInd Bank is also way above the 40% average increase for the banking industry.

RBI asked some state-run and private-sector banks to subscribe to IndusInd Bank's bulk deposit CDs, two sources from banks that have subscribed to these instruments said.

The central bank did not immediately reply to a Reuters email seeking comment.

The sources requested anonymity as they are not authorised to speak to media.

IndusInd Bank had an overall deposit base of 4.09 trillion rupees as of December 2024 of which retail deposits accounted for 46%, according to its latest available data.

($1 = 85.7500 Indian rupees)

(Reporting by Siddhi Nayak and Dharamraj Dhutia; Editing by Muralikumar Anantharaman)

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** India's IndusInd Bank INBK.NS slips 4% to 642.25 rupees, continues to underperform bank stocks, following discrepancy in derivatives portfolio

** Stock down 6.5% in two sessions and nearly 29% since March 10 when bank disclosed the issue

** Lender appoints Grant Thornton to conduct a forensic review into accounting lapses and to check if there is any evidence of fraud or internal misstatements, sources tell Reuters

** Overhang about potential leadership changes following the discrepancy also weighing on stock

** Analysts avg rating on stock "hold" vs "buy", as of Feb. 25, while median PT down to 1,000 rupees from 1,280 earlier, shows LSEG data

** Several brokerage downgrade stock, citing weak internal controls; Jefferies sees potential for stock derating

** INBK down 33% YTD, while bank .NSEBANK index up 2.4%

(Reporting by Vivek Kumar M)

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