India’s central bank – the Reserve Bank of India (RBI) has given a green signal to HDFC Bank’s group companies to buy up to a 9.5% stake in IndusInd Bank, marking a key development in the private banking space.
HDFC Bank has said the Reserve Bank of India (RBI) has approved its subsidiaries to make this investment. The approval is valid for one year from the RBI’s letter dated December 15. HDFC Bank is currently India’s largest private sector lender by market value.
The approval allows several HDFC group entities — including HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Fund, and others — to collectively hold up to 9.5% of IndusInd Bank’s paid-up share capital or voting rights.
This move comes at a difficult time for IndusInd Bank. The lender recently reported its biggest-ever quarterly loss for the three months ended March 31. The loss followed a $230 million impact on its accounts due to governance and accounting issues. These problems led to the exit of former CEO Sumant Kathpalia and Deputy CEO Arun Khurana earlier this year.
IndusInd Bank, a major private sector bank in India, is facing serious questions about a large loss of nearly ₹2,000 crore related to its foreign exchange derivative transactions. The issue has attracted attention from the bank’s auditors, who are now asking whether the situation is simply a mistake in accounting, a technical error, or something more serious like fraud.
The controversy centers around how IndusInd Bank handled certain foreign exchange trades. In March, the bank admitted that its derivatives portfolio was overvalued by around 2.35%, leading to a total loss of about ₹2,000 crore. The concern now is whether this misstatement was accidental or deliberate.So far, the bank has described the issue as an “accounting discrepancy” in its official statements to the stock exchanges and credit rating agencies.
IndusInd Bank’s board has also faced strong criticism from investors. Concerns were raised over weak oversight and delays in disclosing accounting lapses linked to its derivative portfolio, which further hurt the bank’s financials.
Earlier this year, IndusInd Bank announced plans to raise up to $3.47 billion and said its promoters would be allowed to nominate two directors to the board. The latest approval for HDFC group investments is now being closely watched by the market, as it could play an important role in restoring confidence in the troubled lender.
