2 days ago
RBI governor Malhotra says IndusInd Bank doing well, shares jump 5%
Mumbai: The Reserve Bank of India (RBI) on Friday said IndusInd Bank has taken sufficient steps to address improve its accounting practices, with governor Sanjay Malhotra noting that the bank is doing well overall. The remarks signalled regulatory comfort with the lender's actions so far, pushing its shares up over 5%.
The RBI's comments come nearly three months after IndusInd Bank disclosed issues in its derivatives book, which triggered a 27% crash in its shares. Since then, the bank has seen the exit of top executives and faced scrutiny from both the central bank and the capital markets regulator Securities and Exchange Board of India (Sebi).
'The MD & CEO has resigned and it says for taking moral responsibility. So, I thought that should be good enough,' Malhotra said at the post-policy conference.
Reacting to the statement, IndusInd Bank's share hit an intraday high of ₹ 845.9 apiece on the BSE, up 5.3%, according to Bloomberg data. The stock remains 8.6% below its close of 10 March, the day the lender acknowledged the derivatives discrepancies. The broader BSE Bankex index has risen 15% over the same period.
When asked about broader board accountability, Malhotra said, 'Do you expect all the board members…what are you hinting at? The MD & CEO, who is also a member of the board—if he has taken responsibility, that is at the board level itself.'
IndusInd Bank is in the middle of a management transition, following the exit of deputy chief executive Arun Khurana—two days after a report by Grant Thornton on the derivatives lapses—and the resignation of chief executive Sumant Kathpalia before a successor was found.
On 21 May, IndusInd Bank chairman Sunil Mehta said the board was not informed of the discrepancies and that it acted swiftly once they came to light. However, a Sebi probe found the bank had engaged KPMG to review the issues as early as 29 January 2024, well before it disclosed the matter to stock exchanges on 10 March 2025, Mint reported on 31 May.
'Normally we do not comment on individual banks," Malhotra said. "The banking system is very robust and I also mentioned these episodes will happen and should not bother us too much as long as they are far and few between and limited.'
Deputy governor Swaminathan J said the bank had complied with all the requirements set by the RBI. The first was to ensure proper accounting of all discrepancies, backed by internal and external audits, and reflected in the March quarter results.
The second was to conduct a forensic audit and hold those responsible to account. The third priority, Swaminathan said, was to ensure that no customer suffered losses or inconvenience.
Each of these crises offers RBI some lessons and it sharpens the supervisory tools, he said. 'Going forward, we will look at these kinds of red flags so that we are in a position to anticipate them much in advance. If not immediately but very soon it should settle down and then be back to normal.'
Last week, Sebi barred former MD & CEO Sumant Kathpalia and four other senior executives from the market and impounded gains of ₹ 19.78 crore, alleging they sold shares while in possession of unpublished price-sensitive information.
