- RBI assures that IndusInd Bank is financially stable despite accounting discrepancies.
- The bank is actively addressing forex hedging issues with external auditors.
- Depositors need not worry as RBI closely monitors the situation.
What Exactly Happened?
IndusInd Bank recently found errors in its derivatives accounting, specifically in forex hedging. During an internal review, the bank discovered discrepancies in certain account balances, potentially affecting its net worth by around 2.35%—roughly ₹1,500 crore. This revelation followed RBI’s earlier directive to banks regarding their investment portfolios.
To address the issue, IndusInd Bank has hired an external audit team to review and rectify the discrepancies. A detailed report on the matter is expected by the end of March 2024. While this news initially raised concerns, the bank has reassured stakeholders that its overall financial health, including profitability and capital adequacy, remains strong enough to absorb any financial hit.
What Does RBI Say?
The RBI has stepped in to calm any speculation. It confirmed that IndusInd Bank remains well-capitalized, with a comfortable capital adequacy ratio of 16.46% and a provision coverage ratio of 70.20%. Moreover, the bank’s liquidity coverage ratio stands at 113%, well above the required 100%.
The RBI has also instructed the bank’s management to complete all corrective actions by the end of this quarter while making necessary disclosures. Given these measures, the central bank emphasized that depositors should not react to speculative reports and assured that IndusInd Bank remains financially stable.
A Leadership Shake-Up?
In a separate development, the RBI extended the tenure of IndusInd Bank’s CEO by only one year instead of the requested three. Reports suggest that the central bank has advised the bank’s board to look for external candidates for the roles of Chief Operating Officer (COO) and CEO.
With these changes and ongoing audits, all eyes are now on IndusInd Bank as it works to resolve its accounting discrepancies while maintaining investor and depositor confidence.
Leave a Reply