Ashok Hinduja, the promoter of IndusInd Bank, reassured the public during media interactions that the financial health of the bank remains robust, and any capital requirement would be fully addressed. This assurance came after a significant blow to the bank’s market value, with a reduction of approximately Rs 18,000 crore following the revelations about discrepancies in the derivatives portfolio on March 11.
IndusInd Bank’s shares plummeted by 26% after the bank disclosed irregularities in its derivatives holdings, leading to an estimated impact of 2.35% on the bank’s net worth. Despite the crisis, Hinduja, in an interview with CNBC-TV18, expressed confidence that the bank could manage the issues arising from these discrepancies.
He reassured shareholders, saying, “There is no need to panic. These are routine issues. I understand their concerns about why they weren’t informed earlier. However, banking is built on integrity and trust,” he emphasized.
Hinduja further reinforced that the promoter group has unwavering faith in the bank’s board and management. “We have watched IndusInd Bank for over 30 years. It has faced various challenges, and each one has been handled effectively. This issue, too, will be resolved,” he added, underscoring the strength of the bank’s financial fundamentals.
Regarding potential capital needs, Hinduja stated, “If any further capital is required, the promoter group is ready to inject the necessary funds. We are currently awaiting regulatory approval, which is in progress. From what I understand of the bank’s financials, the capital adequacy is not a concern. Even now, the bank maintains a capital adequacy ratio of over 15%.”
When discussing the bank’s leadership, Hinduja reiterated the promoter group’s complete trust in the board and management. “Banks are founded on trust, and we, as promoters, have full confidence. Similar issues have surfaced at various global banks, and we are confident that the bank’s board and management are well-equipped to address them,” he concluded.
The sharp decline in the bank’s stock price was further exacerbated after brokerage firms downgraded the stock, following the Reserve Bank of India’s decision to approve the reappointment of Kathpalia as MD & CEO for just one year, which was shorter than expected.
As part of an internal review of the derivatives portfolio, IndusInd Bank estimated a negative impact on its net worth due to discrepancies in account balances, as per a company filing on March 10. The situation could potentially reduce the bank’s profit by approximately Rs 1,500 crore, according to sources familiar with the matter. However, the final impact may be higher, as an external review is still in progress, according to earlier reports from Moneycontrol.