**IndusInd Bank’s Derivatives Issue Raises Governance Concerns**
The recent findings from the market regulator regarding IndusInd Bank’s derivatives issue seem to challenge the chairman’s assertion that the board was uninformed, prompting discussions about the board’s accountability in such situations. On May 21, IndusInd Bank’s chairman, Sunil Mehta, stated that the board was unaware of the discrepancies in derivatives and acted swiftly upon learning of them. However, an investigation by the Securities and Exchange Board of India (Sebi) revealed that the bank had disclosed the issue to exchanges on March 10, 2025, while the board had engaged KPMG as early as January 29, 2024, to investigate the discrepancies identified by an internal team.
Following the disclosure, the bank’s shares plummeted by 27%. Sebi’s investigation indicated that IndusInd Bank had formed the internal team in September 2023, coinciding with a directive from the central bank regarding banks’ investment portfolios. Subsequently, KPMG was tasked with validating the internal team’s findings, which estimated a negative impact of ₹2,093 crore due to the discrepancies as of December 31, 2023, communicated in an email on February 21, 2024.
Experts have raised significant concerns about the internal governance and disclosure practices at IndusInd Bank, as well as the board’s role in these matters. Shriram Subramanian, managing director of proxy advisory firm InGovern, expressed that the board has lost investor trust, criticizing their delayed response despite hiring KPMG to investigate the discrepancies. He emphasized the need for the Reserve Bank of India (RBI) to take swift action and hold the board accountable.
Historically, the RBI has intervened in management transitions, such as appointing a director to RBL Bank’s board in December 2021, following issues related to a significant loan write-off. In contrast, the RBI has permitted a ‘committee of executives’ to oversee IndusInd Bank’s operations. Observers suggest that if senior management was aware of the discrepancies early on, it is essential to evaluate whether the internal mechanisms for escalating issues were effective.
In conclusion, the situation at IndusInd Bank highlights critical governance challenges and raises questions about the board’s oversight and accountability in managing significant financial discrepancies.
**FAQ**
**What are the implications of the IndusInd Bank derivatives issue?**
The implications include potential regulatory actions against the bank’s board, a loss of investor confidence, and a need for improved governance and transparency in financial disclosures.
