IndusInd Bank has disclosed a significant accounting error, revealing that it incorrectly recorded ₹674 crore as interest income over three quarters of the fiscal year 2024–25. This discrepancy was identified in an internal audit report submitted on May 8, 2025, and the bank has since taken steps to address the issue.
₹674 Crore Misrecorded as Interest Income
The internal audit conducted by IndusInd Bank’s Internal Audit Department (IAD) uncovered that ₹674 crore was erroneously recorded as interest income in its microfinance portfolio over three quarters of FY 2024–25. This misstatement was fully reversed on January 10, 2025. Additionally, the audit revealed unsubstantiated balances of ₹595 crore in the bank’s “other assets” accounts, which were offset against corresponding “other liabilities” in January 2025. These findings were disclosed in a stock exchange filing on May 15, 2025.
Whistleblower Complaint and Internal Review
The discovery of these accounting irregularities followed a whistleblower complaint that prompted the bank’s audit committee to initiate a comprehensive review of transactions recorded under “other assets” and “other liabilities.” The internal audit report submitted on May 8, 2025, confirmed the presence of unsubstantiated balances and the incorrect recording of interest income.
Previous Accounting Issues and Leadership Changes
This is not the first time IndusInd Bank has faced scrutiny over its accounting practices. In March 2025, the bank disclosed discrepancies in its forex derivatives portfolio, leading to a 27% drop in its share price. Subsequently, both CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned in April 2025, taking moral responsibility for the lapses. A forensic review by Grant Thornton revealed that the executives had traded shares while aware of significant accounting discrepancies before this information was publicly disclosed.
Market Reaction and Analyst Concerns
Following the latest disclosure, IndusInd Bank’s shares fell by up to 4% in early trading on May 16, 2025. Brokerage firms have expressed caution, with CLSA downgrading the stock to ‘hold’ from ‘buy’ and reducing its price target to ₹780. Morgan Stanley also flagged a 15–20% downside risk to the bank’s earnings estimates for FY 2026 and FY 2027, maintaining an ‘equal-weight’ rating with a price target of ₹755. Outlook Business
Steps Taken by IndusInd Bank
In response to the findings, IndusInd Bank has stated that it is reviewing the roles and actions of key employees involved in the accounting discrepancies. The board is taking necessary steps to strengthen internal controls, fix accountability, and will take appropriate action as needed.
Conclusion
The revelation of a ₹674 crore accounting error adds to the challenges faced by IndusInd Bank, highlighting the need for robust internal controls and transparent financial reporting. As the bank works to restore investor confidence, the effectiveness of its corrective measures will be closely monitored by stakeholders and regulatory authorities.
