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Informist, Monday, Mar. 10, 2025

--IndusInd Bk: Profitability, capital of bank healthy to absorb one-time hit 
--IndusInd Bk:To mull discrepancies' impact on financials post agency report 
--IndusInd Bk: External agency to validate findings of internal review 
--IndusInd Bk: Hit from discrepancies 2.35% of bank's net worth as on Dec 31 
--IndusInd Bk: Review of derivative portfolio accounts found discrepancies 
 

MUMBAI – IndusInd Bank Monday said an internal review has noticed discrepancies in the accounts of its derivative portfolio. The review has estimated an adverse impact of about 2.35% of the bank's net worth as on Dec. 31, the bank informed the exchanges. As on Dec. 31, IndusInd Bank's net worth was INR 651.02 billion. As such, an adverse impact of 2.35% amounts to about INR 15.30 billion.

The bank has appointed an external agency to independently review and validate the internal findings. "A final report of the external agency is awaited and basis which the bank will appropriately consider any resultant impact in its financial statements," the filing said.

The bank's profitability and capital adequacy remain healthy to absorb this one-time impact, the bank said in its filing.

According to the guidelines issued by the Reserve Bank of India on the Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), banks should categorise their derivatives portfolio into three fair value hierarchies – Level 1, Level 2, and Level 3 – and disclose them in the notes to accounts of their financial statements.

According to the guidelines, banks should also not pay dividends out of net unrealised gains recognised in the profit and loss account arising on fair valuation of Level 3 derivatives assets and liabilities on their balance sheet. Further, such net unrealised gains on Level 3 derivatives recognised in the profit and loss account should be deducted from common-equity tier-1 capital.

"We started reviewing our internal trade book and we started observing some discrepancies in our businesses, which was identified by September and October," the bank's managing director Sumant Kathpalia said in an analyst call. He also said that the income line from these went to the interest income.

"We have hired the external agency to start reviewing our business and that is why we are comfortable that by March end or April early we should be able to identify the gap and it seems to be in line with what we are saying but we want to be very sure about it right now because it's still not validated completely," he added. 

The hedging instruments were used by the balance sheet management desk, which is also the asset-liability management desk of the bank and it emanated on account of the foreign currency deposits and the borrowings in foreign currency, Arun Khurana, deputy chief executive officer, said.

IndusInd Bank's net profit in Oct-Dec declined 39% on year to INR 14.01 billion. For the nine months ended December, the net profit fell 26% on year to INR 49.04 billion. The Basel-III capital adequacy ratio of the bank was at 16.46% as on Dec. 31. The tier-1 capital adequacy ratio of the bank was at 15.18%, and the tier-2 capital adequacy ratio was at 1.28% as on Dec. 31.

On Monday, shares of IndusInd Bank closed 3.9% lower at INR 900.50 On the National Stock Exchange. The bank made the announcement post-market hours.  End

Reported by Kshipra Petkar

Edited by Saji George Titus

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