IndusInd Bank Faces INR 1,960 Crore Loss, Reshuffles Leadership to Bolster Accountability

IndusInd Bank has resolved to completely take on the loss of INR 1,959.98 crore for its quarter ending March 2025. This decision stems directly from the outcome of an independent investigation into the bank's derivatives portfolio. The investigation found a number of significant internal accounting problems, the most critical of which involved the premature termination of derivative contracts. Those problems led the bank to record notional profits, which in turn distorted its financial position. After receiving the final report on April 26, the board acted quickly to ensure that the bank's FY25 full-year financial statements reflected the true nature of the discrepancies.

Accountability Measures and Leadership Reorganization

In a response to the probe's findings, IndusInd Bank announced it will take stringent actions against employees who are found to be responsible for the lapses and will re-organize senior management roles. The realignment is aimed at not just strengthening internal oversight but also restoring trust among all stakeholders.

The troubles at IndusInd Bank began with derivatives-related losses but quickly escalated. In April 2025, when auditors from EY began an in-depth review of the bank's books, several gaping holes came to light. Using metrics not seen since the 2008 financial crisis, EY's examiners found that the bank was something like 60% overcapitalized. And as they dug deep into the numbers, a previously unapprehend disaster unfolded. The bank's books had been so badly cooked that the actual level of its capital was far beneath the regulatory minimum.

Operational Pressures Add to Headwinds

IndusInd Bank was struggling with accounting problems, but that wasn't all. When the bank released its Q4 FY25 business update, it not only bombarded investors with a bunch of accounting issues and alleged it was fixing them, the way the Bank of Baroda and the Punjab National Bank have also done in the past, but it also revealed operational challenges in the form of a big miss on net advances. For instance, the bank's net advances shrank 5.2% quarter-on-quarter (QoQ) to INR 3,47,933 crore (as of the end of March) largely due to a steep contraction in the corporate banking portfolio.

Meanwhile, while total deposits grew a modest 0.4% over the quarter, in line with the bank's reduced ability to generate net advances, the bank's CASA ratio dropped to 32.8% from 37.9% a year earlier, spotlighting weakening deposit franchise strength. As a result, not only are the bank's customers losing confidence in it, but also the entities who are supposed to keep the bank's CASA strong.