IndusInd Bank shares rise 5% as RBI officials hope things will settle soon

Shares of IndusInd Bank rose 5% on Friday after RBI officials expressed confidence that things should soon settle down at the lender, which has grappled with accounting lapses.

Governor Sanjay Malhotra added that the central bank will not fail in its duty in case further steps have to be taken.

The crisis began with a forensic audit by Grant Thornton, which flagged discrepancies in how the bank accounted for certain internal currency derivative transactions conducted over the past six years. The trades, intended to hedge exposures, were not properly marked to market, leading to inflated earnings and misstated positions on the balance sheet.

The shares of IndusInd Bank crashed nearly 50% at one point after the lapses came into public domain, but since then recovered some of the losses. The stock is down 14% year-to-date (YTD).

While the Reserve Bank of India (RBI) has approved an interim executive team of Soumitra Sen and Anil Rao to manage operations, uncertainty looms over permanent leadership.

On May 21, IndusInd Bank disclosed multiple accounting lapses, including inflated fees and interest income and misclassified asset and liability entries, leading the board to suspect internal fraud.

The bank has corrected its financials and informed regulatory authorities. A forensic probe is underway, and accountability measures have been initiated.

Capital markets regulator Sebi has also passed an ex-parte interim order against five senior executives, including the former CEO of IndusInd Bank in an insider trading case.

The market regulator found that these individuals sold shares of the bank while in possession of unpublished price-sensitive information (UPSI), avoiding losses worth nearly Rs 20 crore.