IndusInd CEO Kathpalia Hints at RBI Concerns over his Leadership

IndusInd Bank CEO Sumant Kathpalia suggested that the Reserve Bank of India (RBI) may have doubts about his leadership, which could explain why the regulator approved a one-year extension instead of the board's proposed three-year term.

According to a Business Standard report, his comments were made during an analyst call on Monday (March 10), where Kathpalia also addressed concerns regarding discrepancies in the bank’s internal review of its derivatives portfolio accounts.

The discrepancies are anticipated to affect the bank’s net worth by 2.35% as of December 2024.

“This would have had an impact because the RBI was aware of the issue. I don’t know the rationale behind granting me a one-year extension. But I think it is uncomfortable with my leadership skills, and we have to respect that,” Business Standard quoted Kathpalia as saying.

He also referred to the situation as a "crucial test" for the bank’s leadership succession.

Despite regulatory concerns, Kathpalia reassured that the bank’s operations and growth strategies are unaffected.

In a filing with the stock exchange, IndusInd Bank revealed that an internal review of its ‘Other Asset’ and ‘Other Liability’ accounts within the derivatives portfolio had uncovered discrepancies in account balances.

The bank projected a 2.35% negative impact on its net worth by December 2024.

To ensure transparency, the bank has engaged an external agency to independently review and verify the findings. “A final report is pending, and based on its outcome, the bank will evaluate any impact on its financial statements,” the filing noted.

The bank further assured that its profitability and capital adequacy are strong enough to absorb this one-time impact.

Kathpalia stated that the bank will absorb the loss through its profit-and-loss account, as general reserves cannot be utilized. He aims to resolve the issue within the current quarter (Q4).

Kathpalia expects the external review to be in line with the bank's internal findings, with no significant discrepancies, according to the sources.