IndusInd Bank MD & CEO Sumant Kathpalia steps down amid derivative accounting lapse

In a major shake-up within India’s banking industry, Sumant Kathpalia, the Managing Director and Chief Executive Officer of IndusInd Bank, has stepped down following the exposure of a significant accounting lapse related to the bank’s derivatives portfolio.

The irregularity, uncovered during internal and external audits in March 2025, revealed that the bank had not been following proper accounting standards in recording its derivative transactions—an oversight that has resulted in a financial impact estimated at ₹2,000 crore (approximately $230 million). The severity of the issue prompted regulatory intervention, with the Reserve Bank of India (RBI) reportedly advising both Kathpalia and Deputy CEO Arun Khurana to resign.

Khurana, who was responsible for managing the bank’s treasury front office and global markets—key areas connected to the derivatives lapse—also submitted his resignation. In response to the crisis, IndusInd Bank has sought RBI’s approval to set up an interim executive committee to oversee operations while the leadership vacuum is addressed. Furthermore, the bank has hired two independent external agencies to conduct a detailed forensic investigation into the accounting discrepancies and the breakdown in internal controls.

 The scandal has raised serious questions about the bank’s risk governance practices and its adherence to regulatory norms. As news of the lapse became public, IndusInd Bank’s shares dropped nearly 7%, reflecting shaken investor confidence and uncertainty about the bank’s immediate future. This development marks a sharp fall from grace for Kathpalia, who took over as CEO in 2020 and had been credited with steering the bank through the COVID-19 crisis and expanding its retail footprint. The episode highlights the urgent need for stronger oversight, accountability, and transparency in financial reporting—especially in complex instruments like derivatives. As the bank works to contain the damage and rebuild trust, all eyes are now on the outcome of the investigation and the institution’s efforts to restore regulatory and market confidence.