IndusInd identifies an internal accounting lapse impacting 2.35% of the Net Worth

IndusInd continues to face headwinds. Now in a public disclosure it has informed to have found discrepancies in certain account balances related to its derivative transactions.

• Internal review was conducted in response to RBI’s September 2023 directions on investment portfolios for lenders, focusing on their ‘Other Asset and Other Liability’ accounts.
• The estimated impact is assessed at 2.35% reduction in net worth. The absolute impact by varied analysts is estimated at Rs 1,600 – 2,100 cr.
• The bank has appointed an external agency to validate it’s internal findings. The final report from this external review is expected to be completed within Q4 FY 25, after which the bank will adjust its financial statements accordingly.

Some key highlights from the call arranged by the management on the issue –

• Exact details assessing the impact, reason for lapse if any and the associated responsibility will be shared with the public once external audit is over.
• As per internal assessment so far
  • The issue relates to balance sheet items of borrowings and deposits in foreign currency and the associated hedging of foreign currency exposure by the internal treasury of the bank.
  • The bank considered the policy to be routine and was following the same policy for many years before FY 24. From April 1, 2024, bank stopped following it post RBI’s September 2023 circular.
  • Management is in discussion for the accounting treatment of the identified impact and ideally would like to account for it fully in Q4 itself so that from Q1 of FY 26, both microfinance and this issue are done with and bank can focus on the future.