The CEO of Industrial Bank resigned and blamed accounting violations for cracking down on flag errors, saying: “I assume morality…’
IndusInd Bank CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned after an internal derivative accounting lapse, prompting the RBI to intervene and raise concerns about governance.
Sumant Kathpalia as CEO of Indusind Bank
Sumant Kathpalia has resigned as CEO of Indusind Bank after serious issues related to banks’ handling of internal derivatives transactions. This issue has affected banks’ financial statements and has raised growing concerns about how banks can manage them. Kathpalia said in his resignation letter that he was taking “ethical responsibility” for the matter and asked the bank to consider his resignation effective at the end of the same day.
The development comes a day later after the bank’s deputy chief executive Arun Khurana also resigned. Khurana’s direct responsibility to the Ministry of Finance – the department of problematic derivative accounting. Kurana wrote in her resignation letter that the recent incident was unfortunate and he accepted the full responsibility of the senior bank leader.
Sources close to the matter said the Reserve Bank of India (RBI) suggested Kepalia and Kurana resign after discovering an accounting mistake. The Reserve Bank of India reportedly was not satisfied with the way the bank’s internal controls operated, especially in the business area of the Ministry of Finance. The derivative transactions related have not been considered correctly, which has had an impact on the bank’s earnings statement and even reduced its net assets.
In response to this leadership crisis, Indusind Bank has contacted the Reserve Bank of India to seek permission to form a committee of senior management. The group will assume the duties of CEO during the transition period until the appointment of a new permanent CEO. So far, the bank has not been named for temporary replacement.
This sudden leadership posed a major challenge to Industrial Bank. In addition to having to regain trust from investors and regulators, the bank also needs to strengthen its risk management practices and improve oversight to prevent such problems.
