Rs.1600 Crore Loss: PwC has completed Review of IndusInd Bank’s Derivate Portfolio, Grant Thornton is doing Detailed Investigation
IndusInd Bank is currently facing serious scrutiny after discovering errors in how it handled certain foreign exchange derivative transactions. To understand the issue better, the bank had hired PwC (PricewaterhouseCoopers), a top global auditing firm, in October 2024 to conduct a review of its accounting practices specifically related to its derivatives portfolio. PwC has now completed its initial review and submitted a draft report to the bank’s senior management.
This draft report mainly focuses on reviewing how the accounting was done, but it does not assign blame or investigate how long these discrepancies have been occurring. These aspects were not part of PwC’s responsibilities. Bank officials are currently reviewing the draft and may share their observations with PwC. Earlier, the bank’s top executives also had meetings with PwC consultants to assist in the review process.
While PwC’s review was limited to accounting practices, another firm, Grant Thornton Bharat, is carrying out a more detailed forensic investigation. Their job is to find out exactly what went wrong, uncover any lapses or failures, and identify who should be held responsible. This comes at a time when the bank is under immense pressure to explain and fix the issues that have led to major financial implications.
As per reports, The Reserve Bank of India (RBI) has taken strict action against IndusInd Bank following significant accounting irregularities that led to a sharp decline in the bank’s market value. RBI has indirectly asked IndusInd Bank to fix Accountability for Big Disaster in Bank.
The problem is not small. Financial analysts estimate that the mistakes in the forex derivatives accounting could reduce the bank’s net worth by ₹1,600 crore. This figure is even higher than the bank’s net profit of ₹1,401 crore for the quarter ending December 2024. On March 10, after publicly acknowledging the discrepancies, IndusInd Bank’s Managing Director and CEO, Sumanth Kathpalia, informed investors that an internal review had also been launched. The bank told stock exchanges that these discrepancies could impact around 2.35% of its total net worth as of December.
The stock market reacted sharply. The day after the announcement, IndusInd Bank’s shares plunged by 27%, the biggest single-day fall in its history. Within a year, the stock has fallen by 55%, causing the bank to lose its position as India’s fifth most valuable lender. It now ranks seventh, behind IDBI Bank and Yes Bank, in terms of market capitalization. This massive drop has shaken investor confidence.
Given the situation, the Reserve Bank of India (RBI) stepped in and made a rare public statement on March 15, reassuring depositors that IndusInd Bank remains financially stable and well-capitalised. The RBI confirmed that the bank had already engaged external experts to review its systems and directed the bank to complete all corrective actions by the end of the March quarter. The RBI also asked the bank to disclose the necessary information to all stakeholders to ensure transparency.
Even before the current issues came to light, IndusInd Bank had brought in other external firms like KPMG and EY (Ernst & Young) to help evaluate its treasury policies and procedures, including those related to forex derivatives. These efforts indicate that the bank has been attempting to strengthen its internal controls, but the recent revelations have highlighted serious gaps that now need urgent correction.
