The IndusInd Bank is in the eye of the storm after the Rs 1,577 crore derivative discrepancy. Just three days after the bank’s MD got a 1-year extension from RBI, an internal review of its derivative portfolio, brought to light key discrepancies. This amount is expected to hit the Bank’s net worth by approximately 2.35% as of December 2024. The stock is down a whopping 27%, clocking its biggest single-day fall as a result but the promoters of the bank don’t seem very disturbed.
In a conversation on CNBC-TV18, Ashok Hinduja, the Chairman, Hinduja International Holdings played down the derivative discrepancies issues and called it “normal” and “routine.” He further went on to add that he expects the problem to be resolved and reiterated full promoter support to the bank management and the board.
IndusInd Bank promoters says confident of problem being resolved
Touching upon the issue of transparency and trust in the banking system, he urged shareholders not to panic on the basis of these declarations. According to him, investors should instead “appreciate the management’s transparency in sharing the details of the issue.” While he said that he did not have any prior idea about the discrepancies and management is better placed to share the reason for the delay in highlighting the discrepancies, he shared his confidence in the management and the board. he even went on to say that banks 5-6 times the size of IndusInd Bank have faced similar concerns and resolved it.
Hinduja went on to elaborate that the bank has sufficient capital adequacy to address the hit, “As you can see their financial numbers are very strong and the operating profit for 9 months is Rs 11000 crore plus. The hit of this Rs 1500-1600 crore is not much. These are derivatives and technical problems and the bank has the ability to resolve it. My request to shareholders is they should not panic. These are normal, routine problems.”
Why were investors not alerted earlier?
Hinduja however said that he was “not aware of the discrepancies earlier” and the management is best placed to explain the reason earlier. This according to him to him not a trust or credibility concern as the “The current problem, the discrepancies in derivative portfolio, has not been identified by any outside- neither the auditor nor anyone else. It is the management that has disclosed it on their own. As a promoters, yes this problem has happened and this type of problems keeps happening in many other banks also. But we should give opportunity to the management and clarify this further.”