IndusInd Bank says audit finds Rs 674 cr 'incorrectly' recorded in MFI business

Crisis-hit private lender IndusInd Bank announced on Thursday that its internal audit department (IAD) recently discovered a discrepancy in the recording of interest income within the bank's microfinance business. The audit revealed that Rs 674 crore was inaccurately recorded over three quarters of FY25. 

Furthermore, in response to a whistleblower complaint, the audit committee of the board instructed the IAD to conduct a thorough review of transactions listed under "other assets" and "other liabilities."  The bank revealed the discrepancy following an internal audit and said the entire amount was reversed on January 10, 2025.

“The IAD has also examined the roles and actions of key employees in this context. The board is taking necessary steps to strengthen internal controls, fix accountability of the persons responsible for these lapses, and will take action as appropriate,” the bank said in the regulatory filing.

The bank reported on May 8 that a whistleblower complaint prompted an investigation into concerns within the "other assets" and "other liabilities" accounts by the internal audit team. This investigation uncovered Rs 595-crore worth of unsubstantiated balances in the "other assets" accounts of the bank. These balances were offset against corresponding balances in the "other liabilities" accounts in January.

The bank issued these statements in response to a recent media report indicating that the IAD is conducting an investigation into a series of previous accounting discrepancies brought to light in a whistleblower letter to the Reserve Bank of India (RBI) and the board of directors.

In April, the bank announced that the IAD was conducting a review of the microfinance business following concerns that had been raised. EY was engaged to assist in the examination of relevant records.

This announcement came after a news report suggested that the bank had enlisted EY to audit its microfinance portfolio due to a discrepancy of Rs 600 crore.

As of the December quarter, IndusInd Bank's microfinance (MFI) portfolio amounted to Rs 32,564 crore, representing 9% of its total loan book. The MFI segment, like the wider industry, has been facing challenges. In Q3FY25, the bank reported incremental slippages of Rs 2,200 crore, with a significant portion coming from the MFI portfolio.

IndusInd Bank experienced a series of top-level departures following the discovery of accounting irregularities in derivatives trading. The bank has encountered numerous challenges that have affected its short-term prospects. Of particular concern was a 2.35% overstatement in its derivatives portfolio, attributed to longstanding internal discrepancies in trade accounting.

On Thursday, shares of Indusind Bank closed at Rs 780.30, down by 0.16%.