IndusInd Bank shares decline over 2% following fresh lapses: Lender wrongly recorded ₹674 crore as interest income; check all details

IndusInd Bank shares will be in focus on Friday, May 16, after the lender said its internal audit department (IAD) has found "unsubstantiated balances" of ₹595 crore in "other assets" accounts of the bank. It is also examining the roles of key employees in this lapse.

The lender also said that the IAD has found that a cumulative amount of ₹674 crore was incorrectly recorded as interest over three quarters of FY24-25, which was fully reversed as of January 10, 2025.

“The IAD submitted its report on May 8, 2025, that there were unsubstantiated balances aggregating to ₹595 crores in “other assets” accounts of the bank. These were set off against corresponding balances appearing in “other liabilities” accounts in January 2025,” IndusInd Bank said in a statement to the exchanges on Thursday.

"The Board is taking necessary steps to strengthen internal controls, fix accountability of the persons responsible for these lapses and will take action as appropriate," it further said.

On Friday, shares if IndusInd Bank opened lower to trade at ₹762.95 apiece on the National Stock Exchange, declining 2.25%. Since its last losing, the stock has tumbled almost 4%.

The bank also said following receipt of a whistleblower complaint, the IAD was asked by the Audit Committee of the Board to review transactions recorded in "other assets" and "other liabilities". This was in addition to the review of the bank's MFI business, which the beleaguered lender had disclosed to the stock exchanges on April 22.

Earlier on April 22, IndusInd had said that as part of the process of finalisation of accounts, the bank's IAD is conducting a review of the bank's MFI business to examine certain concerns, and it has engaged EY to assist the IAD.

Following this, global brokerages like Morgan Stanley and CLSA have cut their outlook for IndusInd Bank.

Morgan Stanley, in a note, said it sees significant downside to FY25, FY26 and FY27 earnings estimates following this disclosure. It further added that FY26 and FY27 earnings estimates are at risk of a 15-20% downgrade.

With another discrepancy coming to light, brokerage firm Macquarie believes, in the short-to-medium term, IndusInd’s focus will be to obtain more clarity around the management succession. Uncertainties around management succession, peak credit costs, sustainable margins, governance, and disclosure issues remain key items to monitor.

Meanwhile, CLSA has cut IndusInd Bank's estimates for financial years 2026 and 2027 by 13% and 17% on the back of net interest margin (NIM) compression and lower growth. It said adjusting for the ₹674 crore additional interest income implies that the bank's core NIM was 17 basis points lower than the reported NIM.

IndusInd Bank saw three exits from its top management following a derivatives accounting discrepancies matter. Last month, its long-time director and deputy CEO, Arun Khurana, had resigned on April 29.  

The lender’s chief executive officer (CEO) and managing director (MD) Sumant Kathpalia had stepped down from his post on the same day.

Kathpalia has been heading IndusInd Bank since March 2020. Previously, the RBI approved a two-year extension to Kathpalia in March 2023, while the bank's board had approved his re-appointment for three years.

Over the last five trading days, IndusInd Bank shares have lost 5%, while for a month’s period, the stock has fallen over 1%.

Since November 18, 2024, which is six months, shares of the bank have tanked more than 22%.

The company’s market capitalisation stands at ₹60,766.25 crore.

Shares of the bank had touched its one-year low of ₹606 apiece on March 12, 2025, while its 52-week high of ₹1550 was hit on June 19, 2024.

IndusInd Bank on March 10 first reported that its internal review had estimated an adverse impact of approximately 2.35% of its net worth as of December 2024.

It, however, had said profitability and capital adequacy remain healthy to absorb the impact.

On April 15, the lender disclosed the basic report of another external agency that accounting lapses in the derivative portfolio will have a negative impact of ₹1,979 crore on its net worth.

The bank has assessed an adverse impact (on a post-tax basis) of 2.27% to its net worth as of December 2024 on account of discrepancies relating to derivative deals.