IndusInd Bank CEO has Resigned, Who will run Bank Now? What will happen to Customer’s Money?

IndusInd Bank CEO and Managing Director Sumant Kathpalia has resigned from his role, the bank announced on April 29. His resignation will be effective from the close of the working hours of April 29. “I undertake moral responsibility, given the various acts of commission/ omission that have been brought to my notice,” Kathpalia said in his resignation letter.

He has resigned just a day after Deputy CEO Arun Khurana stepped down following revelations of accounting discrepancies in the bank’s derivatives portfolio.

IndusInd Bank is going through a lot of turmoil since the news of discrepancies in derivatives came to light. Due to these discrepancies, there has been a loss of around Rs.2000 crore in net worth of Bank.

Who will run the Bank now?

IndusInd Bank has announced the formation of an interim “Committee of Executives” to manage the bank’s daily operations in the absence of a Managing Director and Chief Executive Officer (MD&CEO). This move comes after Sumant Kathpalia, the bank’s MD&CEO, resigned on Tuesday. The Reserve Bank of India (RBI) has approved this temporary arrangement, which will be in place until a new CEO is appointed or for a period of three months from the resignation of the former CEO—whichever comes first.

What is the Committee of Executives?

The interim committee will be led by Soumitra Sen, who heads the bank’s Consumer Banking division, and Anil Rao, the Chief Administrative Officer. These executives will oversee the bank’s day-to-day operations. Additionally, an Oversight Committee, which includes the Chairman of the Board and heads of key committees such as Audit, Compensation, and Risk Management, will supervise their work.

This arrangement ensures that the bank can continue its operations smoothly while it waits for the appointment of a new MD&CEO.

The Role of the Oversight Committee

The Oversight Committee will play a crucial role in overseeing the interim management. It will ensure that the bank’s governance and operations continue without disruption. The committee’s members will include:

• The Chairman of the Board
• The heads of the Audit Committee
• The heads of the Compensation and Nomination & Remuneration Committee
• The heads of the Risk Management Committee

Why Was This Decision Made?

The bank emphasized that this interim structure is necessary for maintaining business continuity and governance standards. After Sumant Kathpalia’s resignation, the bank approached the RBI with this plan to manage the transition smoothly. In a statement, the bank assured its stakeholders that it is taking all necessary steps to ensure the stability of its operations while upholding high governance standards.

CEO Resignation: What Happened?

Sumant Kathpalia resigned after a series of challenges during his tenure as MD&CEO. His departure followed the resignation of his deputy, Arun Khurana, just a day earlier. Kathpalia explained his decision in a letter, stating that his resignation was related to the ongoing discussions about derivatives losses at the bank. He accepted moral responsibility for the issues raised, which included accounting errors related to prematurely terminated contracts. These errors reportedly led to inflated profits and a misrepresentation of the bank’s financial health.

Kathpalia, who took charge in March 2020, had faced regulatory scrutiny throughout his tenure. Despite driving significant growth at the bank, including expanding the balance sheet from Rs 4.24 lakh crore to Rs 5.43 lakh crore between 2020 and 2024, his leadership was marked by several regulatory setbacks. These included penalties for failing to meet Know Your Customer (KYC) norms, violations related to deposit interest rates, and unauthorized loan disbursals.

Kathpalia’s Leadership and Challenges

Kathpalia’s tenure was a mix of achievements and regulatory challenges. While he played a key role in expanding the bank’s portfolio, the regulatory setbacks raised concerns about his leadership. During an analyst call, Kathpalia acknowledged that the RBI seemed uncomfortable with his management style, stating, “I think they’re uncomfortable with my leadership in running the bank, and we have to respect that.” He also emphasized the importance of succession planning for the bank’s future.

What’s Next for IndusInd Bank?

With Kathpalia’s resignation, the bank will now focus on finding a new MD&CEO to lead it into the future. The formation of the Committee of Executives ensures that the bank can continue its operations smoothly during this transition period. The Oversight Committee will also play a key role in maintaining governance standards and ensuring that the bank stays on track.

What will happen to Customer’s Money?

The money of all customers in IndusInd Bank is safe right now. Customers can easily withdraw their money without any issues. The bank is going through a lot of issues but as per RBI, Bank is still strong enough to run banking operations. Moreover, as per DICGC rules, customers are liable to be paid upto Rs.5 lakhs in case of any bank failure.