New Delhi, May 21 (PTI) Beleaguered IndusInd Bank on Wednesday reported a consolidated net loss of Rs 2,329 crore for the March quarter hurt by higher provisioning towards accounting frauds, as its board, suspecting involvement of certain employees, directed the bank to report the matter to investigative agencies and regulatory authorities.

Accounting lapses, fraud in microfinance portfolio as well as balance sheet disclosures have rattled the private sector bank, which had ordered an internal audit review, seen top-level resignations, and is undergoing a forensics probe.

The bank had reported a consolidated net profit of Rs 2,349 crore in the March quarter of 2023-24.

For full fiscal FY2024-25, the net profit plunged 71 per cent to Rs 2,576 crore.

During the Q4 of FY'25, IndusInd Bank made a provisioning of Rs 2,522 crore, up nearly three-fold from Rs 950 crore set aside in the corresponding period in FY'24.

The bank's interest income during the quarter fell 13 per cent to Rs 10,634 crore from Rs 12,199 crore in the March quarter of FY'24.

In March, the bank reported a Rs 1,979 crore accounting lapse in its derivative portfolio, followed by its internal audit review finding Rs 674 crore incorrectly recorded as interest from microfinance business, besides a Rs 595 crore “unsubstantiated balances” in "other assets" of balance sheet.

On April 29, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from the bank, following which IndusInd Board appointed a Committee of Executives to oversee the operations of the bank, till a new MD & CEO assumes charge or a period of 3 months.

"... the Bank has taken several measures to understand the root cause of the identified irregularities, ascertain the financial impact and take corrective actions as well as fix accountability...," IndusInd Bank said in a regulatory disclosure.

IndusInd Bank said based on review of reports from internal audit department as well as external professional firm, its board "suspects the occurrence of fraud against the Bank" and the involvement of certain employees having a "significant role" in the accounting and financial reporting of the Bank.

"Accordingly, the Board has directed necessary steps be taken under applicable law (including reporting to regulatory authorities and investigative agencies) and to also fix accountability of all persons responsible for these lapses," it said.

The internal audit report of the bank revealed "involvement of senior Bank officials, including former Key Management Personnel (KMP), in overriding key internal controls".

The bank has reported that likely involvement of senior management in the accounting fraud to the Central Government.

On leadership transition, IndusInd said the RBI has advised the Bank to submit proposals for appointment of the new CEO for the regulator's approval by June 30, 2025.

"The Board is at an advanced stage in the selection process and is confident that recommendations will be submitted to the RBI well in advance of the timeline. This will provide strong leadership and management stability at the Bank," it said.

IndusInd also asserted that its balance sheet remains robust after fully absorbing adverse financial impact and its Board and management are committed to taking all necessary steps to restore the trust and confidence in the institution.

IndusInd Bank Chairman Sunil Mehta, said the Board and the Management acknowledge that the lapses that happened have been unfortunate for the institution.

"However, the Board along with the management have shown a strong resolve to address all the identified issues in timely and comprehensive manner... The learnings from these incidents will be imbibed to reinforce the governance and compliance culture of the organisation," Mehta said.

Expressing confidence on the bank's inherent strengths, Mehta said, "the Bank at its core has profitable business model and it will pivot towards sustainable growth as we put this episode behind us." For the full 2024-25 fiscal, IndusInd Bank reported over 71 per cent drop in net profit to Rs 2,576 crore. In FY'24, the bank had a net profit of Rs 8,977 crore. The bank's net Interest Income for the year FY 25 at Rs 19,031 crores, as compared to year FY'24 at Rs 20,616 crores.

Provisioning during FY'25 rose to Rs 7,136 crore, from Rs 3,885 crore in FY'24.

"The bank is in the process of taking necessary steps to assess roles and responsibilities and fix accountability or persons involved in any of the lapses. The Bank is fully committed towards taking these matters to their conclusion under applicable laws," IndusInd Bank said.

Shares of IndusInd Bank closed at Rs 771.10, down 1.39 per cent over the previous close on BSE. PTI JD MBI JD MR MR

Accounting fraud allegations prompt board to report to authorities and initiate leadership changes and strengthened governance measures. The board treated the matter as accounting fraud, reporting alleged involvement of senior personnel and former key management in overriding internal controls, and directed reporting to regulatory and investigative authorities. Internal and external reviews found misstatements in the derivative portfolio, microfinance interest recognition, and unsubstantiated balances, prompting materially higher provisioning and corrective measures to assess root causes, fix accountability, and strengthen governance while management and the board oversee leadership transition.