RBI allows IndusInd to constitute committee of executives to run bank as CEO resigns

Mumbai: The Reserve Bank of India has allowed the board of IndusInd Bank to constitute a ‘committee of executives’ to run the bank following the resignation of managing director and chief executive officer Sumant Kathpalia, with immediate effect.

IndusInd Bank had sought RBI’s permission following Kathpalia’s resignation on 29 April. The regulator approved the proposal the same day, the bank said in a stock exchange notification on Wednesday.

The ‘committee of executives’ will comprise Soumitra Sen, head of consumer banking and marketing, and chief administrative officer Anil Rao. They will oversee IndusInd Bank’s operations under the guidance of an oversight committee of the board. 

The oversight committee will be headed by Sunil Mehta, chairman of IndusInd Bank’s board, and include the chairs of the bank’s audit committee, the compensation and nomination and remuneration committee, and the risk management committee.

Sen joined IndusInd Bank in 2008 to scale up the bank’s distribution network and its retail branch banking franchise. Prior to that, he had worked with Bank of America, Deutsche Bank AG, ABN AMRO Bank NV, and RBS.

“The Board has constituted such ‘committee of executives’ to oversee the operations of the bank, under the oversight and guidance of the Oversight Committee of the Board till a new MD & CEO of the Bank assumes charge, or a period of 3 months from the date of relieving the incumbent MD & CEO, whichever is earlier,” IndusInd Bank said in its notification.

“The bank is taking all necessary steps to ensure stability and continuity of its operations while maintaining high standards of governance,” it added.

Also read | IndusInd Bank’s black box moment

IndusInd’s accounting discrepancies

Kathpalia’s resignation was the second high-profile exit from IndusInd Bank following whole-time director and deputy CEO Arun Khurana’s resignation a day earlier after accounting discrepancies were discovered at the bank.

An external agency report, submitted on 26 April, identified incorrect accounting of internal derivative trades, especially in the case of early termination that resulted in recording of notional profits, as the principal root cause for the accounting discrepancy.

The report also examined the roles and actions of key employees in this context, determining the cumulative hit of the discrepancies on the bank’s profit and loss account at  ₹1,960 crore. IndusInd Bank discontinued internal derivative trades from 1 April.

Last week, the bank said it would reflect the resultant impact in the financial statements for 2024-25 and take measures to strengthen internal controls. It also said it was taking steps to fix accountability of the persons responsible for these lapses and “re-align roles and responsibilities of senior management”.

IndusInd Bank shares were down 1.5% at ₹824.10 each on NSE at 11.55am on Wednesday.