Has RBI Approved an Executive Committee to Oversee IndusInd Bank's Operations?

New Delhi, April 30 (NationPress) The Reserve Bank of India (RBI) has officially sanctioned the formation of a temporary committee tasked with supervising the activities of IndusInd Bank. This committee will fulfill the functions and responsibilities typically held by the chief executive officer (CEO) until a permanent CEO is appointed, as stated by the bank on Wednesday.

This decision follows the resignation of Sumant Kathpalia, the bank’s Managing Director and CEO, amid concerns regarding a derivatives accounting error that has negatively impacted the bank's net worth.

According to a stock exchange notification, the committee will include Soumitra Sen (Head–Consumer Banking) and Anil Rao (Chief Administrative Officer), who will oversee the daily operations of the bank under the guidance of an Oversight Committee established by the Board.

This Oversight Committee will be led by the Chairman of the Board and will consist of the chairs of the Audit Committee, the Compensation and Nomination and Remuneration Committee, and the Risk Management Committee.

“In line with the RBI's approval, the Board has established this ‘Committee of Executives’ to manage the operations of the Bank. This will occur under the oversight of the Board’s Oversight Committee until a new MD and CEO is appointed or for a period of 3 months following the departure of the current MD and CEO, whichever comes first,” as detailed in the bank's stock exchange filing.

The bank has assured that it is taking all necessary measures to ensure the stability and continuity of its operations while “upholding high standards of governance”.

IndusInd Bank's shares experienced a decline during early trading on Wednesday.

Furthermore, the Deputy CEO Arun Khurana has also resigned following the revelation of accounting irregularities within the bank's derivatives portfolio through an independent audit.

The results from an investigation conducted by a professional firm appointed by the bank's board were submitted on April 26. The audit findings confirmed that inaccurate accounting practices had an adverse cumulative effect of Rs 1,959.98 crore on the bank's profit and loss statement as of March 31, 2025.

The issue was first recognized on March 10, when IndusInd Bank announced that mark-to-market (MTM) losses in its derivatives portfolio could affect up to 2.35% of its net worth as of December 2024 due to inconsistencies in its derivative accounts discovered during an internal review. This resulted in a loss in net worth of approximately Rs 1,600 crore.

The RBI has mandated the bank to engage global audit firm Grant Thornton Bharat to perform a forensic investigation to ensure an accurate evaluation of the losses.

The Grant Thornton investigation revealed that improper accounting of internal derivative trades by the bank, especially in cases of early termination, led to fictitious profits, which caused accounting discrepancies.