IndusInd Bank’s stock experienced a notable recovery, climbing as much as 4.2% on Wednesday, following the bank’s announcement that the financial impact of its recent accounting discrepancies would be slightly less severe than previously estimated. The bank now projects a 2.27% reduction in net worth as of December-end, compared to the earlier estimate of 2.35%. This adjustment has provided some reassurance to investors concerned about the bank’s financial stability.
The discrepancies, which involve the booking of currency derivatives over the past six years, were initially estimated at $175 million. However, an external review has quantified the impact at approximately ₹19.79 billion ($230.92 million) as of June 30. IndusInd Bank plans to reflect this impact in its financial statements for the fiscal year 2024-25 and has committed to strengthening its internal controls related to derivative accounting operations.
Despite the accounting lapse, the bank anticipates reporting a profit for the fourth quarter and the fiscal year 2025. However, the Reserve Bank of India has reportedly requested the CEO and deputy CEO to step down once suitable replacements are found, a claim that IndusInd Bank denies. A forensic audit conducted by Grant Thornton is currently underway to investigate the root causes of the discrepancies.
The bank’s shares had previously declined by 18.3% since March 10, when the accounting issues were first disclosed. The recent uptick in share price suggests a cautious optimism among investors, though attention remains focused on the forthcoming results of the forensic audit and any potential regulatory actions.
Analysts suggest that while the immediate financial impact appears manageable, the incident underscores the importance of robust risk management and governance practices within financial institutions. The outcome of the ongoing investigations will be pivotal in restoring investor confidence and determining the bank’s future trajectory.
