Why Did Sumant Kathpalia Resign as CEO of IndusInd Bank?

In a significant development in the Indian banking sector, Sumant Kathpalia has stepped down as the Managing Director and CEO of IndusInd Bank. His resignation comes in the wake of a substantial accounting discrepancy in the bank’s derivatives portfolio, leading to a loss of approximately ₹1,960 crore. This article delves into the reasons behind Kathpalia’s resignation and its implications for IndusInd Bank.

The Derivatives Accounting Lapse:

In March 2025, IndusInd Bank disclosed discrepancies in its derivatives portfolio, primarily involving misaccounted internal derivative trades. These trades were not properly recorded, leading to an overstatement of profits and an adverse impact on the bank’s net worth. An independent audit by Grant Thornton estimated the cumulative loss at ₹1,959.98 crore as of March 31, 2025.

RBI’s Involvement and Leadership Changes:

The Reserve Bank of India (RBI) took cognizance of the issue and reportedly urged both CEO Sumant Kathpalia and Deputy CEO Arun Khurana to resign. Kathpalia, acknowledging the lapses, submitted his resignation, taking moral responsibility for the discrepancies. The bank has since sought RBI’s approval to form an interim executive committee to manage operations until a new CEO is appointed.

Impact on IndusInd Bank:

The revelation of the accounting lapse and subsequent leadership changes have affected investor confidence. IndusInd Bank’s shares experienced a decline following the announcement, reflecting market concerns over governance and financial integrity. The bank has initiated comprehensive reviews and engaged external agencies to investigate the matter thoroughly.

Conclusion:

Sumant Kathpalia’s resignation marks a pivotal moment for IndusInd Bank, highlighting the critical importance of robust internal controls and transparent financial practices. As the bank navigates this challenging period, stakeholders will closely monitor the appointment of new leadership and the implementation of corrective measures to restore trust and stability.