Blog
Good Governance - The Case of IndusInd Bank
Jun 27, 2025
First, what is the issue.
On March 10, 2025, per Reuters, IndusInd Bank declared that it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative accounts found during an internal review. SEBI’s interim order estimates the amount
of this impact at Rs 1,529.88 crores. The Bank said this impact emerged from internal derivative trades, whose disclosed values were not compliant with disclosure rules re the investment portfolio of commercial banks, issued by the Reserve Bank of India (RBI).
ED and Dy CEO Mr Khurana was quoted - "Effective April 1 (2025?), we can confirm that there will be no internal trades in our book; we have not entered into any internal trades. The internal trades that were there prior to that period which were existing before April 1 have been unwound and all according mark-to-markets taken."
In September 2023, the RBI issued these revised disclosure rules for implementation with effect from April 1, 2024. They essentially require banks to ‘mark to market’ their internal investments in Derivatives. So, if a Derivative was purchased at Rs 100 cr and the market (or sale) value dropped to Rs 79 cr by the reporting date, which is usually the end of each quarter, instead of showing the value equal to the purchase price, the bank has to take a loss of Rs 21 cr and show the value of the asset at Rs 79 cr. This is called ‘marking to market’. If the market value increases, accounting practice will normally dictate that the asset value still be disclosed at the conservative value at which the asset was purchased. This is to ensure that unrealized gains are not shown, but clearly estimable losses are taken into the books.
This disclosure did not happen from April 1, 2024 as required. The first disclosure happened only on March 10, 2025. In other words, there was continuing non-compliance with the RBI’s regulations for more than 11 months. This non-compliance also meant non-compliance with SEBI’s Prohibition of Insider Trading (PIT) Regulations, 2018 for an even longer period of roughly 15 months. These 2 non-compliances appear to be the issue. Could this have been avoided? How? And by whom?
Link for reference : https://www.linkedin.com/pulse/good-governance-case-indusind-bank-devdutta-modak-pbr2f
First, what is the issue.
On March 10, 2025, per Reuters, IndusInd Bank declared that it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative accounts found during an internal review. SEBI’s interim order estimates the amount
of this impact at Rs 1,529.88 crores. The Bank said this impact emerged from internal derivative trades, whose disclosed values were not compliant with disclosure rules re the investment portfolio of commercial banks, issued by the Reserve Bank of India (RBI).
ED and Dy CEO Mr Khurana was quoted - "Effective April 1 (2025?), we can confirm that there will be no internal trades in our book; we have not entered into any internal trades. The internal trades that were there prior to that period which were existing before April 1 have been unwound and all according mark-to-markets taken."
In September 2023, the RBI issued these revised disclosure rules for implementation with effect from April 1, 2024. They essentially require banks to ‘mark to market’ their internal investments in Derivatives. So, if a Derivative was purchased at Rs 100 cr and the market (or sale) value dropped to Rs 79 cr by the reporting date, which is usually the end of each quarter, instead of showing the value equal to the purchase price, the bank has to take a loss of Rs 21 cr and show the value of the asset at Rs 79 cr. This is called ‘marking to market’. If the market value increases, accounting practice will normally dictate that the asset value still be disclosed at the conservative value at which the asset was purchased. This is to ensure that unrealized gains are not shown, but clearly estimable losses are taken into the books.
This disclosure did not happen from April 1, 2024 as required. The first disclosure happened only on March 10, 2025. In other words, there was continuing non-compliance with the RBI’s regulations for more than 11 months. This non-compliance also meant non-compliance with SEBI’s Prohibition of Insider Trading (PIT) Regulations, 2018 for an even longer period of roughly 15 months. These 2 non-compliances appear to be the issue. Could this have been avoided? How? And by whom?
Link for reference : https://www.linkedin.com/pulse/good-governance-case-indusind-bank-devdutta-modak-pbr2f
First, what is the issue.
On March 10, 2025, per Reuters, IndusInd Bank declared that it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative accounts found during an internal review. SEBI’s interim order estimates the amount
of this impact at Rs 1,529.88 crores. The Bank said this impact emerged from internal derivative trades, whose disclosed values were not compliant with disclosure rules re the investment portfolio of commercial banks, issued by the Reserve Bank of India (RBI).
ED and Dy CEO Mr Khurana was quoted - "Effective April 1 (2025?), we can confirm that there will be no internal trades in our book; we have not entered into any internal trades. The internal trades that were there prior to that period which were existing before April 1 have been unwound and all according mark-to-markets taken."
In September 2023, the RBI issued these revised disclosure rules for implementation with effect from April 1, 2024. They essentially require banks to ‘mark to market’ their internal investments in Derivatives. So, if a Derivative was purchased at Rs 100 cr and the market (or sale) value dropped to Rs 79 cr by the reporting date, which is usually the end of each quarter, instead of showing the value equal to the purchase price, the bank has to take a loss of Rs 21 cr and show the value of the asset at Rs 79 cr. This is called ‘marking to market’. If the market value increases, accounting practice will normally dictate that the asset value still be disclosed at the conservative value at which the asset was purchased. This is to ensure that unrealized gains are not shown, but clearly estimable losses are taken into the books.
This disclosure did not happen from April 1, 2024 as required. The first disclosure happened only on March 10, 2025. In other words, there was continuing non-compliance with the RBI’s regulations for more than 11 months. This non-compliance also meant non-compliance with SEBI’s Prohibition of Insider Trading (PIT) Regulations, 2018 for an even longer period of roughly 15 months. These 2 non-compliances appear to be the issue. Could this have been avoided? How? And by whom?
Link for reference : https://www.linkedin.com/pulse/good-governance-case-indusind-bank-devdutta-modak-pbr2f
Devdutta Modak
