IndusInd Bank CEO and MD Sumant Kathpalia stepped down on Tuesday amid continued outrage over accounting lapses in its derivatives portfolio. The announcement came less than a day after his deputy Arun Khurana also tended his resignation with immediate effect. The bank has seen shares fall nearly 8% since March 10 after it first revealed the impact on its net worth from accounting discrepancies.
“I wish to submit my resignation from the services of the Bank in relation to the ongoing Derivatives discussion. I undertake moral responsibility, given the various acts of commission/ omission that have been brought to my notice. I would request that my resignation be taken on record at close of working hours today,” Kathpalia wrote in a letter to IndusInd Bank’s board that was included in the stock market filing.
The missive came hours after deputy CEO Arun Khurana submitted a similar letter citing his oversight role amidst the controversy. He had also been serving as executive director and (until last week) as the chief financial officer following the resignation of former CFO Gobind Jain in early January.
The country’s fifth-largest private lender (with a balance sheet of $63 million) indicated on Sunday that it would take a $229.56 million hit to its accounts for the recently concluded financial year due to incorrect treatment of derivatives going back several years.
An external audit by independent professional firm Grant Thornton indicated that the bank was now facing a 2.27% hit to its net worth. The report submitted on Saturday assessed that the total impact on the profit and loss account at Rs 1,959.98 crore as of March 31 — broadly in line with the amount disclosed on April 15.
“The report identifies incorrect accounting of internal derivative trades, especially in case of early termination, which resulted in recording of notional profits, as the principal root cause for accounting discrepancy,” said the bank in a filing with the stock exchanges.