India’s IndusInd Bank posts largest-ever quarterly loss due to suspected employee fraud

BENGALURU: IndusInd Bank, India’s fifth-biggest private lender by assets, reported its biggest-ever quarterly loss on Wednesday and said it suspects some employees had engaged in fraud that led to accounting lapses, which weighed on results.

The bank, founded in 1994, posted a standalone net loss of 22.36 billion rupees ($261.6 million) for January-March, compared with a profit of 23.47 billion rupees a year earlier.

Net interest income fell to 30.48 billion rupees from 53.76 billion rupees, as the bank adjusted for accounting lapses across its derivatives book and its microfinance portfolio.

IndusInd disclosed in March that years of incorrect accounting of internal derivative trades led to a $230 million hit to its accounts for the financial year ended March 31.

Separately, an internal audit of its microfinance business found that around $80 million was incorrectly recorded as interest over three quarters, which it reversed in January.

Its CEO, Sumant Kathpalia, and deputy, Arun Khurana, stepped down last month.

The “Board suspects the occurrence of fraud against the Bank and the involvement therein of certain employees having a significant role in the accounting and financial reporting of the Bank,” IndusInd Bank said in a statement.

This statement, released just ahead of its earnings report, did not give further details about the employees it suspected.

Six officials of India’s IndusInd Bank under investigation for insider trading, sources say

The bank said its fourth-quarter results accounted for the impact of all discrepancies identified in probes into these cases.

IndusInd reported a 6% decline in advances on a quarter-on-quarter basis to 3450.19 billion rupees as of March 31, 2025, while deposits were flat.

Low-cost current account and savings account deposits fell 5% over the quarter, reflecting nervousness among depositors.

Gross non-performing assets rose to 3.13% as of March-end from 2.25% a quarter ago, which, the bank said, was due to correcting the accounting issues and some rise in stressed loans in the quarter.

“The bank’s financials now reflect full and fair representation of all the concerns brought to its attention,” Chairman Sunil Mehta said in a post-earnings conference call.

“We have attempted to start fiscal year 26 with a clean slate.”

Management vacuum

Since the CEO and the deputy’s exit, IndusInd has been run by two senior officials and overseen by the board of directors.

The Reserve Bank of India has asked for names of potential replacements by June 30, the bank said, adding it was confident of submitting its recommended candidates well before that.

However, Mehta said the board would not wait for a new CEO to take action against lapses and that it would act “expeditiously”.

India’s markets regulator is investigating six IndusInd officials for insider trading related to the accounting lapses, Reuters reported last week.