Latest news with #IndusInd
Time of India
6 days ago
- Business
- Time of India
IndusInd fiasco robs yen magic in NRI deposits
Mumbai: A fancy financial product-a special deposit linked to Japanese yen (JPY)-has suffered a jolt in the wake of the IndusInd shakeout. Banks peddled it to attract deposits from NRIs and impress analysts, while the diaspora members who parked money lapped up the higher-than-usual returns banks gave. That show is running out of steam. The Reserve Bank of India (RBI) is understood to have told a few banks to align the rates on JPY special deposits with the market, senior bankers told ET. Yes Bank , one of the lenders which aggressively marketed special JPY deposits, though at a scale far smaller than what IndusInd did, has dramatically lowered the interest rate on the FDs from well over 2% two months ago (before the IndusInd story broke) to less than 0.4% now. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Pare a neuropatia: descubra como NeuroFit Undo (Join our ETNRI WhatsApp channel for all the latest updates) The RBI spokesman did not comment on the matter. When asked whether Yes was instructed by the regulator, a bank spokesperson said, "The bank continues to look for ways to further improve its deposit costs and align with market dynamics by regularly reviewing interest rates in comparison to peers. In addition, the bank has adjusted its foreign currency deposit rates, including for JPY, to stay in line with industry norms and evolving interest rate conditions." Live Events An explainer: What's the nature of these special JPY deposits? Coined as 'premium rupee plans' (PRPs), NRIs gave foreign currency to banks who paid them back in rupees-with the amount of rupee to be repaid on maturity decided upfront. And in generating a higher return than the regular foreign currency FDs sold to NRIs, banks did something different: they sold JPY in the inter-bank forward market. Neither Indian banks had earnings in JPY nor did NRIs usually deposit yen. The forward deal was simply aimed to generate a higher return. The NRI depositors weren't bothered what banks did with their money-whether the funds were converted to JPY or any other currency-as long as they received a good return. What really was the deal? What's the regulator's point? Here's what happens with PRPs: An NRI going for PRP in JPY deposit would place dollar or rupee (lying in her rupee account). The bank offers a return that's better than the interest on regular foreign currency non-resident (FCNR) JPY deposits for NRIs, and promises to repay a certain amount in rupee after 3 or 5 years depending on the FD tenure. What does the bank do with the money? It sells the dollars in the spot forex market to buy JPY. Why? Since the bank has accepted JPY deposits, it should reflect as JPY balance in its nostro account-a foreign currency account a local bank has with an overseas bank. But the JPY does not sit in the nostro for long. The bank converts the JPY into dollars and then into rupees to lend to domestic borrowers. The forward deals and true cost of deposit The bank then 'sells JPY forward' to get rupees after three years. (Since there is no rupee-yen market, the forward happens in two legs-rupee to dolllar, and dollar to yen). Under this, the bank agrees to give JPY and receive rupees from another bank after 3/5 years. As it sells JPY forward, the bank receives a premium, which at one point was around --6%. (It has come down since then). The premium (or most of it) is passed on to the depositor who ends up receiving around 8% (i.e, 2% on yen deposit and 6% as premium.) But, how would the bank get JPY after 3 years? It doesn't earn in JPY. So it simultaneously does a 3-year forward purchase of JPY. On this transaction, it pays a premium. (This is a balance-sheet hedge, where the bank's liability desk does a forward deal with the treasury which in turn enters into a forward deal with another bank). So, the bank's true cost of deposit is 2% plus the premium it pays to buy JPY forward. But, as is often the practice in banking, the premium a bank pays for hedging is not included in the cost of deposit. Therefore, the bank claims that its cost of deposit is just 2%-a number that thrills analysts and shareholders as it lowers the bank's overall fund cost. What happens now? PRPs will be available in dollars, but the charm of JPY special deposits would wane. JPY was the preferred currency for forward deals as it yielded a steeper premium, giving the banks headroom to offer higher returns on the special deposits. A currency's premium is a function of interest rate differentials with another country. Thanks to Japan's ultra-low interest rate, JPY usually has had a higher premium. "Special deposits or PRPs would go on as authorities would also like to have forex inflows. But at the same time, we believe RBI is not comfortable if a bank offers a JPY return that is not in line with the rates prevailing in the market. First, it does not reflect the real cost of deposit. Second, it may not be a sustainable strategy in attracting NRI deposits. Premium, determined by the market, is the same for all banks. But it may be tough for a bank to offer too high a basic rate not aligned with the market."
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Business Standard
7 days ago
- Business
- Business Standard
How Sebi fixed ₹20 cr disgorgement in IndusInd Bank insider trading case
The market regulator on Wednesday asked five senior IndusInd Bank officials, including former deputy CEO Arun Khurana and former CEO Sumant Kathpalia, to disgorge around ₹20 crore for alleged insider trading. Khurana has to disgorge ₹14.4 crore, Kathpalia ₹5.21 crore, and others amounts ranging from ₹4 lakh to ₹7 lakh. Here's how the Securities and Exchange Board of India (Sebi) arrived at these figures: IndusInd Bank on March 10 disclosed losses in its derivative portfolio, estimating an adverse impact of 2.35 per cent of its net worth of around ₹1,530 crore (as of December 2024). The bank's stock fell 27.2 per cent the next day: from ₹901 to ₹656. Sebi investigation Following the disclosure and stock crash, Sebi initiated a suo motu investigation to identify trades made with unpublished price-sensitive information (UPSI) related to the derivative losses. The regulator examined records from NSE, BSE, depositories, KPMG, and IndusInd Bank, focusing on the period from September 12, 2023 to March 10, 2025. Why September 2023? Sebi's probe revealed that following the Reserve Bank of India's Master Direction (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) on September 12, 2023, IndusInd formed an inter-departmental team by September 26 to address derivative accounting issues. At the team's first meeting on September 26, discrepancies in the accounting of derivative contracts were identified, prompting the bank to calculate unreported losses. Who traded before the crash? Also Read Sebi identified individuals who were aware of the derivative loss discussions and traded IndusInd shares during the UPSI period. On December 4, 2023, Khurana sold 348,500 shares to net ₹53 crore. Kathpalia sold 125,000 shares, earning ₹19.2 crore. The three other individuals sold smaller quantities around the same time. Sebi noted that none of these individuals had submitted a trading plan for FY24 or FY25, which would have indicated pre-planned sales unrelated to UPSI. Sebi, in a 32-page interim order, concluded that these individuals traded while aware of the UPSI, thereby avoiding significant losses. 'It would be naive to assume the noticees traded routinely while discussions on discrepancies with a substantial financial impact were ongoing,' said the order. Calculating disgorgement amount Sebi calculated the disgorgement based on losses avoided due to the 27.2 per cent stock price drop post-disclosure. Had the individuals sold their shares after the UPSI became public, their proceeds would have been 27.165 per cent lower, the regulator has held. Thus, Sebi multiplied the number of shares sold by each individual by this percentage to determine the loss avoided, which formed the disgorgement amount. Kathpalia's 125,000 shares sold for ₹19.2 crore and 27.165 per cent of it comes to ₹5.21 crore.
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Business Standard
7 days ago
- Business
- Business Standard
How Sebi fixed ₹20-cr disgorgement in IndusInd Bank insider trading case
The market regulator on Wednesday asked five senior IndusInd Bank officials, including former deputy CEO Arun Khurana and former CEO Sumant Kathpalia, to disgorge around ₹20 crore for alleged insider trading. Khurana has to disgorge ₹14.4 crore, Kathpalia ₹5.21 crore, and others amounts ranging from ₹4 lakh to ₹7 lakh. Here's how the Securities and Exchange Board of India (Sebi) arrived at these figures: IndusInd Bank on March 10 disclosed losses in its derivative portfolio, estimating an adverse impact of 2.35 per cent of its net worth of around ₹1,530 crore (as of December 2024). The bank's stock fell 27.2 per cent the next day: from ₹901 to ₹656. Sebi investigation Why September 2023? Sebi's probe revealed that following the Reserve Bank of India's Master Direction (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) on September 12, 2023, IndusInd formed an inter-departmental team by September 26 to address derivative accounting issues. At the team's first meeting on September 26, discrepancies in the accounting of derivative contracts were identified, prompting the bank to calculate unreported losses. Who traded before the crash? Sebi identified individuals who were aware of the derivative loss discussions and traded IndusInd shares during the UPSI period. On December 4, 2023, Khurana sold 348,500 shares to net ₹53 crore. Kathpalia sold 125,000 shares, earning ₹19.2 crore. The three other individuals sold smaller quantities around the same time. Sebi noted that none of these individuals had submitted a trading plan for FY24 or FY25, which would have indicated pre-planned sales unrelated to UPSI. Sebi, in a 32-page interim order, concluded that these individuals traded while aware of the UPSI, thereby avoiding significant losses. 'It would be naive to assume the noticees traded routinely while discussions on discrepancies with a substantial financial impact were ongoing,' said the order. Calculating disgorgement amount Sebi calculated the disgorgement based on losses avoided due to the 27.2 per cent stock price drop post-disclosure. Had the individuals sold their shares after the UPSI became public, their proceeds would have been 27.165 per cent lower, the regulator has held. Thus, Sebi multiplied the number of shares sold by each individual by this percentage to determine the loss avoided, which formed the disgorgement amount. Kathpalia's 125,000 shares sold for ₹19.2 crore and 27.165 per cent of it comes to ₹5.21 crore. The smaller amounts for the other three individuals were similarly calculated.
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Business Standard
7 days ago
- Business
- Business Standard
IndusInd Bank shares rise after Sebi bans ex-CEO, 4 others from markets
Shares of crisis-hit IndusInd Bank traded higher after a volatile opening, following the market regulator barring its former chief executive officer (CEO), Sumant Kathpalia and four other senior officials from trading in the securities market. IndusInd Bank's stock rose as much as 0.7 per cent during the day to ₹810 per share, after falling by 0.3 per cent during open. The stock trimmed some gains to trade 0.6 per cent higher, compared to a 0.15 per cent advance in Nifty50 as of 9:48 AM. Shares of the company have fallen over 6 per cent from their recent peak of ₹863, which it hit earlier this month. In March, the stock plunged over 30 per cent after noting the discrepancies in its derivatives portfolio. The stock has fallen 15.4 per cent this year, compared to a 4.8 per cent advance in the benchmark Nifty50. Sebi bans IndusInd ex-CEO, 4 others from markets In an interim order issued on May 28, Securities and Exchange Board of India (Sebi) said that these individuals had traded in IndusInd Bank shares while being in possession of unpublished price-sensitive information (UPSI), violating insider trading rules. The other executives named in the order are Arun Khurana (former executive director and deputy CEO), Sushant Sourav (head of Treasury operations), Rohan Jathanna (head of GMG operations), and Anil Marco Rao (chief administrative officer for consumer banking operations). Sebi conducted a suo-motu preliminary examination after Chairman Tuhin Kanta Pandey said the market regulator is looking into any "egregious violations" by senior management of the lender. IndusInd Bank Q4 results IndusInd Bank posted a net loss of ₹2,329 crore, a first in 19 years, for the quarter ended March 31, 2025. The lender's losses came as it substantially ramped up provisions and reversed incorrectly booked revenue and income entries worth over ₹2,500 crore linked to accounting discrepancies in the derivatives and microfinance segments discovered during the quarter. Despite the sharp Q4 loss, the bank reported a net profit of ₹2,575 crore for FY25, down 71 per cent year-on-year (YoY). The lender's net interest income (NII) was down 43 per cent YoY in Q4FY25 at ₹3,048 crore, while other income was down 72 per cent YoY at ₹709 crore. IndusInd Bank analyst ratings Twenty of the 37 analysts tracking IndusInd Bank have a 'buy' rating on the stock, 15 have a 'hold' call, while 22 suggest a 'sell' on the stock, according to Bloomberg data.
Mint
7 days ago
- Business
- Mint
IndusInd Bank share price trades flat after Sebi bars former CEO, four others from securities market for insider trading
IndusInd Bank share price traded flat on Thursday after capital markets regulator Sebi barred the company's former CEO Sumant Kathpalia, and four other senior officials from accessing the securities markets in connection with an alleged insider trading in the bank's shares. IndusInd Bank shares opened marginally lower at ₹ 803.05 apiece as against its previous close of ₹ 804.75 per share on the BSE. IndusInd Bank share price gained as much as 0.73% to ₹ 810.60 apiece. The Securities & Exchange Board of India (SEBI) has also impounded ₹ 19.78 crore collectively from the five individuals. The other officials of IndusInd Bank restrained by the regulator for alleged insider trading are former executive director and deputy CEO Arun Khurana, treasury operations head Sushant Sourav, global markets group (GMG) operations head Rohan Jathanna, and Anil Marco Rao, chief administrative officer of consumer banking operations. 'There is no impact on the financial, operation or other activities of IndusInd Bank arising out of the Interim Order,' IndusInd Bank said in a regulatory filing on Wednesday. According to the interim order passed by Sebi, it was found that these senior executives allegedly traded in IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI) related to discrepancies in account balances of the bank's derivative portfolio. By doing so, they violated insider trading regulations. The case originated from a Master Direction issued by the Reserve Bank of India (RBI), which had a significant operational and financial impact on IndusInd Bank. Sebi noted that the internal team of the bank was aware of the financial implications due to discrepancies in the derivative portfolio and had already begun calculating the impact internally. The bank informed its executives that the estimated financial impact stood at ₹ 1,749.98 crore. In an email dated 4 December 2023, Kathpalia acknowledged the seriousness of the matter — an event the Sebi identified as the point of origin for the unpublished price sensitive information (UPSI). Despite this, IndusInd formally classified the information as UPSI only on 4 March 2025 and disclosed it publicly on 10 March 2025 via a stock exchange filing — over 15 months after the information first emerged. As of December 2024, IndusInd's net worth stood at ₹ 65,101.65 crore. The eventual disclosure led to a material impact of approximately ₹ 1,529.88 crore. Sebi's investigation further revealed that five senior executives collectively sold 479,000 IndusInd Bank shares between December 2023 and March 2025. Importantly, no purchases were made by these individuals during this period, which Sebi interpreted as indicative of deliberate and strategic offloading. IndusInd Bank's average share price in December 2023 stood at ₹ 1,541.75, with the stock reaching a high of ₹ 1,618.90 on 28 December 2023. Following the disclosure, IndusInd Bank share price plummeted to a 52-week low of ₹ 605.40 on 12 March 2025. This marked a decline of more than 60% from the period during which the executives offloaded the shares to the point of public disclosure. In its order, Sebi noted that noticee nos. 1 to 5 (five officials) traded in the scrip of IBL while being insider and accordingly barred them 'from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders.' On April 29, CEO Kathpalia and Deputy CEO Khurana resigned from the bank. Following their exit, the IndusInd Bank Board appointed a Committee of Executives to oversee daily operations until a new MD & CEO takes charge or for a period of three months, whichever is earlier. The fraud-hit private sector lender reported a loss of ₹ 2,329 crore for the quarter ended March 2025, its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices. In the March quarter, the bank took impact of all the irregularities brought to the notice, including a ₹ 1,960 crore hit from incorrect recognition of derivative trades, cumulative interest income reversal of ₹ 674 crore due to incorrect accounting, disclosed a ₹ 172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, set off ₹ 595 crore of incorrect manual entries posted as "Other Assets" and "Other Liabilities" in the past, and also recognized the higher slippages. The internal audit report of the bank revealed 'involvement of senior Bank officials, including former Key Management Personnel (KMP), in overriding key internal controls'. The bank reported the likely involvement of senior management in the accounting fraud to the Central Government. IndusInd Bank share price has fallen 19% in three months and 17% YTD. Over the past one year, IndusInd Bank shares have declined 45%, while the stock is down 13% in three years. At 9:25 AM, IndusInd Bank share price was trading 0.53% higher at ₹ 809.05 apiece on the BSE.
