Shares of IndusInd Bank nosedived 27% on March 11, after the lender uncovered discrepancies in its derivatives portfolio, potentially leading to significant losses. The private sector lender informed the stock exchanges on March 10, about the discrepancies, in a disclosure under SEBI norms.
Internal Review After RBI Order
In its disclosure the bank said that during the internal review of processes relating to Other Asset and Other Liability accounts of the derivative portfolio, post implementation of RBI Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 issued in September 2023, including accounting of Derivatives, applicable from April 01, 2024, bank noted some discrepancies in these account balances.
The Estimated Loss
The bank also shared the estimated loss due to these discrepancies. Its disclosure said, “Bank's detailed internal review has estimated an adverse impact of approximately 2.35% of Bank’s Net worth as of December 2024. A Moneycontrol report quoted some sources familiar with the matter pegging the loss to the private sector lender at ₹1,500 crore rupees. However, the final figure could go higher, after an external review in the matter is concluded.
External Review Underway IndusInd Bank has already appointed “a reputed external agency” to independently review and validate the internal findings. The lender has said, “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 Bank's profitability and capital adequacy remains healthy to absorb this one-time impact.”
What’s A Derivates PortfolioA derivatives portfolio is basically a set of financial contracts whose value depends on assets like stocks or currencies. Banks use these to manage risks, but if the numbers don’t add up—like in IndusInd’s case—it can lead to massive losses.
