IndusInd Bank Admits Rs.674 Crore Error in Microfinance Business; Takes Action After Whistleblower Complaint
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IndusInd Bank has admitted to a major error in its financial reporting. On Thursday, the bank informed stock exchanges that an internal audit of its microfinance business found that ₹674 crore had been wrongly recorded as interest income. This error took place over the first three quarters of the financial year 2024-25 (FY25). The incorrect income entry has now been completely reversed as of January 10, 2025.
What Triggered the Review?
The issue came to light after a whistleblower raised concerns. The whistleblower submitted a letter pointing out possible financial irregularities, which led the Audit Committee to ask the Internal Audit Department (IAD) to examine specific transactions. These transactions were mainly recorded under two heads: “other assets” and “other liabilities.”
₹595 Crore Found as Unsubstantiated Entries
In its findings on May 8, the internal audit team reported that ₹595 crore worth of balances in “other assets” were not properly backed by documents or records. These unverified amounts were later adjusted against similar entries listed under “other liabilities” in January 2025.
The IAD also looked into how key employees were involved in these lapses. Based on this review, the bank’s board is now taking steps to strengthen internal controls and hold the responsible individuals accountable. Disciplinary actions are expected to follow.
Previous Disclosures and Role of EY
This disclosure follows earlier reports stating that Ernst & Young (EY) had been hired to conduct a detailed review of the microfinance portfolio. This step was taken after a separate whistleblower report suggested a ₹600 crore discrepancy in the bank’s microfinance business.
In April, the bank had already informed the public that it was reviewing the microfinance unit after some concerns were brought to its attention. EY was called in to support the internal audit by examining the relevant records.
Microfinance Portfolio Under Stress
As of the quarter ending December 2024, IndusInd Bank’s microfinance portfolio stood at ₹32,564 crore. This made up 9% of the bank’s total loan book. The microfinance segment, already under stress due to broader industry challenges, contributed significantly to the bank’s slippages (loan defaults). In the third quarter of FY25, the bank reported fresh slippages of ₹2,200 crore, with a large portion coming from the microfinance business.
Top Leadership Resigns Over Related Issues
Adding to the bank’s troubles, the Managing Director & CEO and the Deputy CEO both resigned last month. They stepped down taking moral responsibility for a separate issue—an error in the bank’s derivative portfolio that reportedly caused a loss of nearly ₹2,000 crore.
After these resignations, the Reserve Bank of India (RBI) allowed IndusInd Bank to form an interim executive committee to manage CEO-level duties. This temporary committee will operate for up to three months or until a new CEO is appointed, whichever is earlier.
Interim Leadership in Place
The newly formed executive committee includes senior bank officials. Soumitra Sen, head of consumer banking, and Anil Rao, the chief administrative officer, have been given leadership roles during this transition period.
