Shares of IndusInd Bank fell 6 percent on April 22, following reports of a second forensic audit into the bank’s microfinance portfolio. The audit, commissioned by the bank’s board, will be conducted by Ernst & Young (EY) and focuses on a Rs 600 crore discrepancy related to accrued interest income.

The stock hit a low of Rs 776 per share in early trading, reflecting investor concern over deepening scrutiny of the bank’s internal processes. This comes just weeks after IndusInd Bank appointed PricewaterhouseCoopers (PwC) to independently review its forex derivatives accounting—an area where another massive potential loss has emerged.

Second Audit Increases Pressure

The EY-led audit is intended to run concurrently with a separate forensic investigation already being carried out by Grant Thornton Bharat (GTB). While GTB is examining accounting irregularities in the forex derivatives portfolio, EY will focus on the bank’s microfinance operations, particularly the misstatement of interest income.

The EY team’s mandate is broad—it includes evaluating possible operational failures, assessing internal controls, and determining if there were fraudulent activities or negligence involved. Sources indicate the Rs 600 crore mismatch in accrued interest may have resulted from systemic misreporting or deliberate misclassification, both of which are red flags for regulatory scrutiny.

Fallout From Forex Accounting Review

Earlier this month, PwC submitted an independent audit of IndusInd Bank’s forex derivatives segment. The report concluded that the bank may face losses amounting to Rs 1,979 crore, far exceeding initial estimates of Rs 1,600 crore. According to the report, this amount is equivalent to around 3.1 percent of the bank’s net worth, which immediately raised concerns among investors and analysts.

The PwC findings came with several disclaimers, suggesting that the full extent of the issue may not yet be known. This has further compounded uncertainty surrounding the bank’s financial stability and internal controls.

Impact on Stock and Market Sentiment

Since March 10, when the bank first made public the irregularities in its forex derivative dealings, IndusInd Bank’s stock has lost 11 percent in value. However, after initially sliding, the stock had gained 16 percent over the past five trading sessions, buoyed by investor confidence in the bank’s swift corrective measures.

Today’s renewed decline indicates that market sentiment remains fragile. News of a second audit, particularly into a different arm of the bank’s lending business, has shaken investor confidence again. While the move reflects proactive governance by the board, it also underlines the widening scope of internal issues at the bank.

Leadership Changes Ahead of Results

In a separate but potentially related development, IndusInd Bank announced a top-level restructuring in its finance department. Santosh Kumar has been appointed Deputy CFO, taking over from interim CFO Arun Khurana, who had temporarily stepped into the role in January.

Kumar’s elevation comes just ahead of the bank’s Q4 earnings release, signaling an attempt to stabilise leadership during a period of scrutiny and uncertainty. Khurana, who continues to head treasury operations, is expected to work closely with the new Deputy CFO during this transition.

Growing Oversight and Corporate Governance

The unfolding situation at IndusInd Bank underscores the growing role of third-party forensic audits in Indian banking. Appointing multiple firms—PwC, EY, and GTB—within weeks reflects an aggressive cleanup effort aimed at reassuring both regulators and investors.

These probes also highlight the importance of robust internal audit mechanisms in identifying anomalies before they snowball into crises. While the bank’s proactive measures have drawn praise from some quarters, analysts caution that continued revelations could weigh on the stock until audits are complete and accountability is clearly established.

Investor Perspective

From an investor’s point of view, the current developments are a double-edged sword. On one hand, the bank’s willingness to address irregularities head-on is commendable. On the other hand, the depth and scope of potential problems remain a concern.

Some institutional investors have reportedly opted to wait for clarity from the audits before making fresh commitments. Others view the current correction as a buying opportunity, especially if the bank can demonstrate strong fundamentals in its upcoming quarterly earnings.

Regulatory Ramifications

It is also likely that the Reserve Bank of India (RBI) and other regulatory bodies will take a closer look at internal controls within the bank. If lapses are found to be systemic, penalties or directives for structural reform may follow.

Moreover, given that IndusInd Bank is a significant player in India’s private banking landscape, these events could trigger a broader conversation around transparency and financial risk disclosures in the banking sector.

Conclusion

The second forensic audit initiated by IndusInd Bank is a clear indicator of its attempts to regain trust amid widening concerns over accounting irregularities. With three separate audit firms now reviewing various segments of its operations, the bank is at a critical juncture.

What happens next will depend not only on the findings of these audits but also on how the bank responds to them operationally and publicly. While investor confidence has shown signs of resilience, sustained recovery will require transparency, accountability, and clean execution.

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