IndusInd Bank Initiates CEO Search Amid Regulatory Scrutiny and Financial Challenges

Market Performance

IndusInd Bank's share price rose by up to 3.56% on March 26, 2025, following reports that the private lender is initiating the search for a new CEO. During early trading, the stock climbed by 3% and was recorded at ₹650.75 on the BSE around 9:51 AM, reflecting a 2.15% increase.

CEO Search Process

Reports indicate that IndusInd Bank's board has decided to engage a search firm to facilitate the appointment of a new CEO. This decision follows a directive from the Reserve Bank of India (RBI), requiring the bank to submit a list of external candidates for the role. Typically, such lists are provided to the RBI approximately six months before the current CEO's term concludes.

The bank's move to find a new CEO comes amid increased regulatory scrutiny. On March 6, 2025, the RBI sent a letter to IndusInd Bank addressing governance matters, which the bank disclosed in a filing the following day. While the bank's board had requested a three-year extension for the current CEO, Sumant Kathpalia, the RBI approved only one extension.

Regulatory Developments and Financial Impact

On March 10, 2025, IndusInd Bank reported issues related to its derivatives accounting. These accounting concerns have contributed to a 6% decline in the bank's share price over the last five trading sessions and a more significant drop of over 32% since the beginning of the year.

In a separate development, the Joint Commissioner of CGST & Central Excise, Thane Commissionerate, imposed a ₹30.15 crore penalty on IndusInd Bank due to GST-related discrepancies under Section 122(1)(ii) of the CGST Act, 2017. The bank has indicated that it may pursue legal options to challenge the penalty.

Financial Data

As of December 31, 2024:

• Net Profit: ₹4,904 crore (nine-month period)

The bank disclosed that the inconsistencies in its derivatives accounting could potentially reduce its net worth by 2.35%, representing nearly one-third of its net Profit for the nine months ending December 2024.

Summary

IndusInd Bank's share price increased following reports that the lender is initiating a search for a new CEO. This decision comes in response to regulatory instructions from the RBI and follows heightened scrutiny over governance practices. The bank is also addressing challenges related to a ₹30.15 crore GST penalty and accounting discrepancies in its derivatives portfolio, which could significantly impact its financial standing. The search for a new CEO is expected to progress in the coming weeks as the bank responds to regulatory requirements and financial pressures.