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The resignation of IndusInd Bank CEO Sumant Kathpalia has intensified concerns about the bank’s stability and future trajectory
IndusInd Bank
IndusInd Accounting Lapse: The resignation of IndusInd Bank CEO Sumant Kathpalia has intensified concerns about the bank’s stability and future trajectory. Analysts fear the exit could stall the bank’s recovery, disrupt operations, trigger fresh deposit outflows, and further strain asset quality. They urge the board to appoint a seasoned private-sector banker as the next CEO, warning that a public-sector appointee may lack the specialized experience needed for IndusInd’s core portfolios, such as vehicle finance, microfinance, and gems and jewellery.
“In light of the CEO’s exit, we anticipate heightened business disruptions and margin pressure, with a renewed risk of deposit withdrawals,” said Anand Dama, head of BFSI at Emkay Global Financial Services. Ashutosh Mishra, head of institutional equities research at Ashika Stock Broking, echoed this sentiment, saying, “The bank may have lost a year’s worth of business momentum. There could be more issues lurking that new leadership may uncover.”
Kathpalia’s resignation follows the disclosure of a Rs 1,960 crore loss linked to discrepancies in the bank’s derivatives portfolio. His departure came just after Deputy CEO Arun Khurana also stepped down. In his resignation letter, Kathpalia took full moral responsibility for the accounting lapses, which have rocked confidence in the lender, the fifth-largest private sector bank in India by assets, with a market cap of Rs 65,000 crore.
In his resignation letter, Kathpalia stated, “I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice.” Sources familiar with the matter revealed that the Reserve Bank of India (RBI) had advised both executives to step down after an external audit uncovered significant irregularities in the bank’s derivatives accounting practices.
IndusInd’s asset quality has already been deteriorating, with gross non-performing assets (GNPAs) rising to 2.25% in Q4 FY25 from 1.9% a year earlier, driven largely by stress in the microfinance segment. The stock hit a 52-week low of Rs 605 on March 11, following the disclosures, down sharply from its peak of Rs 1,550. On Wednesday, it closed nearly flat at Rs 838.45 on the BSE.
Suresh Ganapathy, head of financial services research at Macquarie Capital, also criticized the board’s oversight. “With such an illustrious board, it is surprising this went unnoticed. The chairman, Sunil Mehta, was appointed by the government to revive Yes Bank when it was on the brink—yet a similar crisis has occurred under his watch here,” he noted in a research report.
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