Financial Health Remains Stable: RBI Statement on IndusInd Bank
The Reserve Bank of India (RBI) has addressed speculation surrounding IndusInd Bank, reassuring depositors and investors that the private lender remains well-capitalised and financially stable. The clarification follows concerns over an accounting discrepancy linked to forex hedging, which triggered a sharp decline in the bank’s stock.
In its statement, the RBI confirmed that IndusInd Bank maintains a strong financial position, with a Capital Adequacy Ratio (CAR) of 16.46% and a Provision Coverage Ratio (PCR) of 70.20% as of December 31, 2024. Additionally, the bank’s Liquidity Coverage Ratio (LCR) stood at 113% as of March 9, 2025, surpassing the regulatory requirement of 100%. The central bank reassured depositors that IndusInd Bank’s financial stability remains intact and that there is no need for panic.
The RBI has directed the bank’s board and management to complete all remedial measures within the current quarter, ensuring transparency in its financial reporting. An external audit team has been engaged to assess the impact of the discrepancies and implement corrective actions.
IndusInd Bank’s stock fell 27% on March 11, 2025, following reports of the accounting discrepancy. The issue stems from the bank’s forex hedging activities rather than bad loans or asset mismanagement. The accounting miscalculation resulted in a Rs 1,500 crore impact on the bank’s Q4 FY24 profits—equivalent to 2.3% of its total net worth.
While talking to Financial Express, analyst Krishan Appala noted that IndusInd Bank had aggressively pursued NRI deposits in recent years, accumulating Rs 58,600 crore in foreign currency deposits, which accounted for 14.3% of its total deposits of Rs 4.09 lakh crore. While the strategy initially provided liquidity, internal hedging mechanisms led to an unexpected accounting mismatch, creating the reported discrepancy.
Concerns over IndusInd Bank’s leadership have intensified following reports that MD & CEO Sumant Kathpalia and Deputy CEO Arun Khurana sold nearly 80% of their shareholding months before the financial discrepancy was made public. These shares, which were allotted under the ESOP programme, were sold at around Rs 1,524 per share, near the bank’s 52-week high. Since then, the stock price has declined significantly.
The RBI has launched a review of banks’ derivative books to ensure similar issues do not arise elsewhere. The Securities and Exchange Board of India (SEBI) is also expected to conduct a preliminary inquiry. Meanwhile, the central bank’s discomfort with IndusInd Bank’s leadership was evident when it approved only a one-year extension for Kathpalia instead of the three-year term sought by the bank’s board. The search for a potential successor is now underway.
While the accounting discrepancy has raised governance concerns, analysts assert that IndusInd Bank remains financially strong. As of December 31, 2024, the bank’s total deposits stood at Rs 4.09 lakh crore, with outstanding loans of Rs 3.66 lakh crore. Its gross non-performing asset (NPA) ratio was at 2.25%, which remains within manageable limits.
With a capital adequacy ratio of 16.46%, IndusInd Bank is well above the regulatory minimum of 11.5%, demonstrating its ability to withstand financial stress. The RBI has reassured depositors that their funds remain safe and has emphasised that India has never witnessed a scheduled commercial bank failing without regulatory intervention. The central bank’s past actions, such as the rescue of Lakshmi Vilas Bank in 2019 and Yes Bank in 2020, highlight its commitment to protecting depositors.
