IndusInd Bank share price was stable on Friday as the bank announced that it will be investing accounting issues. The stock touched yearly low at Rs 606 recently as the bank grapples with accounting troubles. However, RBI has confirmed that IndusInd Bank is adequately funded and client's funds are safe in the bank. The accounting issue has already eroded investor wealth and it will now be seen how management comes out of this crisis. The stock is currently stable but positions in the stock should only be taken with long term view. The stock was trading around Rs 680 and was down by 0.6 percent while other private banks were trading positive.

IndusInd Bank Orders Forensic Probe Amid Rs 2,100 Crore Derivatives Discrepancy

IndusInd Bank has initiated a formal investigation into accounting inconsistencies amounting to Rs 2,100 crore within its derivatives portfolio. The discrepancy, which could potentially impact approximately 2.35% of the bank’s net worth, has prompted the board to appoint an independent professional firm to conduct a thorough review. This move aims to uncover the root cause, assess compliance with accounting standards, and determine accountability. In the wake of the disclosure, credit rating agency Moody’s has placed the bank’s baseline credit assessment under review for a possible downgrade. Despite the turmoil, promoter entity IIHL has reaffirmed its financial backing if required.

Accounting Discrepancy Triggers Internal Audit Initiative

IndusInd Bank has disclosed a serious discrepancy in its derivatives portfolio, estimated to be around Rs 2,100 crore. According to the bank, this accounting issue could have a potential 2.35% impact on its net worth, leading to immediate concern over the robustness of its financial reporting practices.

In response, the board of directors, in a meeting held on Thursday, resolved to appoint an independent professional firm. The firm’s mandate is to conduct a comprehensive investigation to ascertain the underlying cause, evaluate whether the treatment of derivative contracts was consistent with applicable accounting standards, and establish accountability.

Independent Review to Evaluate Impact and Accountability

The appointed firm will be tasked with evaluating not only the correctness of the accounting treatment but also identifying process failures, governance lapses, and individual responsibilities related to the errors. The investigation will provide critical insights into whether the discrepancies were procedural in nature or stemmed from deeper structural issues.

This comes on the heels of the bank’s earlier announcement on March 10, which revealed that an external review was already underway, triggered by unexplained irregularities in account balances tied to its derivatives operations.

Moody’s Flags Potential Risk with Review for Downgrade

In the aftermath of the disclosure, Moody’s Investors Service has responded by placing IndusInd Bank’s Ba1 Baseline Credit Assessment (BCA) and its adjusted BCA under review for downgrade. This signals a warning of potential deterioration in the bank’s standalone credit strength.

The BCA is a critical indicator of a bank’s fundamental financial health, excluding any support it may receive from affiliated entities. A downgrade could affect investor sentiment, borrowing costs, and future access to capital markets.

Promoters Reaffirm Support, No Fresh Capital Sought—Yet

Despite the turbulence, IndusInd International Holdings Ltd (IIHL), the Mauritius-based investment arm of the Hinduja Group and the promoter of IndusInd Bank, has stepped in to express confidence in the bank’s fundamentals.

Chairman Ashok Hinduja clarified that the bank has not sought additional capital from its promoters thus far. However, he stated that the promoters remain fully committed and are ready to infuse capital if necessary. This support gains added weight considering the Reserve Bank of India's in-principle approval allowing IIHL to raise its stake in the bank from 16% to 26%, giving it greater strategic influence.

Market Implications and Investor Outlook

The revelations have understandably shaken investor confidence in a bank traditionally viewed as a stable player in the private sector banking space. The magnitude of the discrepancy, combined with Moody’s cautious stance, underscores the potential for further volatility in the short term.

However, the prompt response by the board to initiate an independent probe, and the promoter’s proactive assurance of support, may help stabilize market perception if findings are swiftly and transparently disclosed.

Investors will be keenly watching:

The outcome of the forensic investigation
Regulatory responses, if any
Updates from Moody’s and other rating agencies
The trajectory of the bank’s operational metrics in upcoming quarters

A Test of Corporate Governance and Resilience

The accounting irregularities at IndusInd Bank have opened a critical chapter that will test the resilience of its governance framework, risk management systems, and leadership accountability. The decision to engage a third-party review reflects a commitment to transparency, but much will depend on the speed and thoroughness of corrective actions.

While the promoter’s pledge of capital support offers a temporary cushion, restoring stakeholder confidence will require more than financial backing—it will require trust rebuilt through disclosure, reform, and decisive leadership.