IndusInd Bank Shares Plunge 25% Hitting a 52-week Low The trouble stems from an internal review that uncovered errors in how the bank accounted for hedging costs linked to past forex transactions.
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IndusInd Bank's shares nosedived 25 per cent on Tuesday, hitting a 52-week low of INR 674.55, after the bank revealed discrepancies in its derivatives accounting. The sharp decline, the steepest since March 2020, followed the bank's admission of hedging miscalculations that could shave off up to INR 2,000 crore from its net worth. The disclosure has rattled investor confidence and raised concerns about the bank's internal controls and governance.
The trouble stems from an internal review that uncovered errors in how the bank accounted for hedging costs linked to past forex transactions. The missteps identified between September and October 2024, were traced to the Reserve Bank of India's (RBI) updated guidelines on derivatives management. IndusInd acknowledged that the miscalculation could reduce its net worth by 2.35 per cent as of December 2024. The news triggered a heavy selloff, dragging the stock to its lowest level since November 2020.
The market reaction was swift and severe. By the close of trading, IndusInd Bank's stock had lost nearly a quarter of its value. The fallout also weighed on the broader market, with the Nifty Bank index slipping 0.7 per cent and the Nifty 50 declining by 0.27 per cent.
Investor anxiety was compounded by the RBI's recent decision to extend IndusInd Bank CEO Sumant Kathpalia's term by only one year, instead of the three years the bank had sought. The move, announced just a day before the accounting issue was disclosed, signaled regulatory unease over the bank's leadership and operational stability. On Monday, ahead of the accounting revelation, IndusInd Bank's stock had already fallen nearly 4 per cent in reaction to the RBI's decision.
IndusInd Bank has moved quickly to contain the damage. It has launched a detailed internal review and appointed an external agency to validate its findings. The bank assured investors that its capital adequacy and profitability remain strong enough to absorb the one-time impact. The loss will be reflected in either the fourth quarter of FY25 or the first quarter of FY26.
Despite these assurances, the accounting lapse has raised serious questions about the bank's internal controls and governance framework. Analysts have cautioned that further regulatory scrutiny and potential penalties could follow. For now, IndusInd Bank faces the tough task of regaining investor trust as it works to strengthen oversight and prevent similar missteps in the future.
