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Indusind Bank Ghotala
Big scam in IndusInd Bank Shares fell 27% there could be a loss of Rs 2000 crore will investors lose money.
IndusInd Bank’s Accounting Irregularities and Market Impact.
Last Updated- March 12 2025 | 5:57 PM IST
IndusInd Bank made several errors in its accounting and delayed correcting these mistakes for a considerable period which ultimately tested the patience of the banking regulator. Consequently the bank was pressured to disclose the estimated losses to investors. As a result, IndusInd Bank’s stock plummeted by over 27% on Tuesday reducing its market capitalization by approximately ₹19,000 crore. To Day Stock Market News
On Monday IndusInd Bank informed the stock exchange about a significant loss in its derivatives portfolio which amounted to 2.35% of its net worth as of December 2024. This announcement triggered a sharp decline in the bank’s stock prices. To Day Stock Market News
Alongside the stock price drop another significant development occurred within the bank when the Reserve Bank of India (RBI) approved only a one-year extension to the tenure of the bank’s Managing Director (MD) and Chief Executive Officer (CEO) Sumant Kathpalia. This came despite the bank’s board having approved a three-year reappointment for Kathpalia which was announced by the bank on Friday.To Day Stock Market News
Sources from the banking industry suggest that the regulator did not support the boards recommendation for a three-year extension to the current CEOs tenure. Instead by granting only a one-year extension the regulator signaled that the bank must submit new CEO candidates as soon as possible. The bank will need to propose at least two names for the CEO role. Kathpalias tenure is set to end on March 23 – 2026. To Day Stock Market News
The bank also delayed identifying and classifying the derivative losses. When a bank invests or transacts in foreign exchange it must hedge these transactions by converting them into Indian Rupees, which incurs costs. The trading desk must transfer this cost to Asset Liability Management (ALM). When the foreign exchange investment is repaid there can be either a profit or a loss. To Day Stock Market News
IndusInd Bank incorrectly reported this loss in its balance sheet as an expected receivable amount and included it under intangible assets which was inaccurate. Banking industry sources stated that the bank was required to provision for this but it failed to do so. When the RBI’s ‘Commercial Banks’ Investment Portfolio Classification Valuation and Operation (Guidelines), 2023’ came into effect on April 1 2024, the bank faced difficulties complying with the rules due to its accounting practices. Initially IndusInd Bank indicated that it would comply with the regulations by September. To Day Stock Market News
Industry sources mentioned that in November last year the bank appointed the external agency PwC to audit its derivatives portfolio, after which the regulator began to take precautionary measures. To Day Stock Market News
Due to regulatory violations a potential loss of ₹1500 crore was disclosed although speculations suggest this could rise to ₹1900 to ₹2000 crore. The exact figure will become clear from the external auditors final report. To Day Stock Market News
This irregularity had persisted for the past four to five years but it appears that approximately ₹1,200 crore of this issue surfaced in the past two years exacerbating the problem. To Day Stock Market News