RBI stepped in after IndusInd Bank 'delayed' provisioning by a year | Current Affairs | Vision IAS

Daily News Summary

Get concise and efficient summaries of key articles from prominent newspapers. Our daily news digest ensures quick reading and easy understanding, helping you stay informed about important events and developments without spending hours going through full articles. Perfect for focused and timely updates.

News Summary

Sun Mon Tue Wed Thu Fri Sat

RBI stepped in after IndusInd Bank 'delayed' provisioning by a year

2 min read

IndusInd Bank's Operational Issues and Regulatory Actions

IndusInd Bank recently experienced a significant stock market crash, with its share price dropping by 27% and a decrease in market capitalization by ₹19,000 crore. This drop is attributed to alleged operational missteps and regulatory scrutiny over accounting practices.

Key Issues

  • Accounting Practices:
    • Non-compliance with accounting practices and delay in correcting discrepancies.
    • Losses from the derivatives portfolio were reflected as receivables, classified under intangible assets, without necessary provisions.
  • Regulatory Norms:
    • Difficulty in complying with the RBI's "Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023." These norms became effective on April 1, 2024.
    • While most banks complied by June 30, 2024, IndusInd failed to meet the timeline, initially indicating compliance by September but failing to do so.
    • Faced additional provisioning requirements for microfinance and jewellery loan portfolios.

Regulatory Actions

  • CEO’s Term: The RBI extended CEO Sumant Kathpalia's term by only one year, despite a board recommendation for three years, and requested new CEO nominations.
  • External Audit: In November, IndusInd Bank appointed PwC to audit and validate the derivatives portfolio, likely prompted by regulatory pressure.
  • Disclosure: A special board meeting disclosed potential losses of ₹1,500 crore, with speculation that losses could rise to ₹1,900-2,000 crore pending the final audit report.

Impact and Outlook

  • The discrepancies span over four to five years, with about ₹1,200 crore accumulated in the last two years, intensifying the issue.
  • Concerns raised regarding the inability of internal and statutory auditors to detect these discrepancies earlier.
  • Tags :
  • Banking regulation
  • IndusInd Bank
Subscribe for Premium Features