RBI asks IndusInd Bank board to fix accountability over accounting lapses that shook investor trust
Apr 10, 2025
Synopsis
The Reserve Bank of India (RBI) has directed the board of IndusInd Bank to ensure accountability for accounting lapses that triggered a steep drop in the bank’s market value in early March and eroded depositor and investor confidence. Although RBI did not name the bank explicitly during a recent press briefing, Deputy Governor J. Swaminathan said it is standard regulatory practice to initiate forensic audits and accountability reviews in such cases. Those found responsible—internal or external—will be investigated and face appropriate action for the lapses.
The Reserve Bank of India (RBI) has instructed the board of IndusInd Bank, as part of the prudential practice, to fix accountability into protracted accounting lapses that caused the private lender’s market value to shrink more than a quarter overnight early March and shook both depositor and investor trust.
At Wednesday's post-review interaction with the media, RBI officials didn’t directly name the lender, but indicated it was standard practice for the regulator to seek a forensic audit and an accountability review.
“Whenever such incidents occur, we direct the boards to ensure that proper forensic and accountability studies are carried out,” said J. Swaminathan, RBI Deputy Governor. “Anyone found accountable, whether internal staff, external parties, or service providers, will be included in the investigation, and appropriate actions will be taken. Any lapses will be dealt with accordingly.”
Swaminathan also emphasised that the RBI’s primary goal is to minimise the impact of banking crises on customers.
Shielding the Vulnerable
“Our intention is to minimize disruption and, most importantly, to ensure that customers remain protected,” he stated. “We have taken adequate measures to reduce customer inconvenience and safeguard their funds as much as possible. We never waste a good crisis; there are always lessons learned, and our supervisory tools improve with every episode.”
Earlier, ET had reported that the RBI had directed IndusInd Bank's board to initiate a comprehensive forensic investigation into the bank. The investigation will assess whether senior management was aware of or responsible for the discrepancies in the derivatives portfolio, which led to a loss of nearly Rs 1,600 crore.
Meanwhile, RBI Governor Sanjay Malhotra reassured that the banking system remains strong and resilient.
“At the system level, it is safe, resilient, and robust,” he said. “We have nearly 10,000 non-banking financial companies (NBFCs) and about 1,500 cooperative banks. Over the past 8-9 years, around 70 cooperative banks have failed, but that number is small. Our focus is on minimising their impact.”
Malhotra further clarified that incidents like the one involving IndusInd Bank should not be seen as complete failures. He highlighted that the RBI has systems in place to detect issues, non-compliance, and risks.
“These are episodes, not total failures,” he said. “We must ensure, through various means, that these incidents occur less frequently. For that, we have various tools, regulations, and supervision, and banks themselves have multiple layers of protection, including business units, compliance teams, and audits. It’s a collaborative effort to continuously improve the system.”
[The Economic Times]
