IndusInd Bank flags Rs 172 crore internal fraud in MFI ops, says certain staff involved

IndusInd Bank has revealed a potential case of internal fraud within its microfinance operations, where Rs 172.58 crore was inaccurately recorded as fee income in the financial year 2024–25. This discrepancy was uncovered during investigations conducted by an external professional firm and the bank’s Internal Audit Department (IAD).

The IAD submitted a report on May 20, 2025, indicating that the sum of Rs. 172.58 crores had been erroneously classified as fee income across three quarters, ending December 31, 2024, and was later corrected in the fourth quarter of FY 24-25, as stated in a filing by the bank.

The internal audit committee said, "On the basis of revaluation of the findings, there is likely involvement of senior bank officials including former Key Managerial Personnel (KMP) in overriding internal control across functions and concealment from the board and statutory auditors of the wrongful accounting practices adopted over such period if time, as indicated in the respective investigation and review reports."

According to a regulatory filing by IndusInd Bank, the board has reason to believe that fraud may have occurred within the Bank. This suspicion is based on an examination of internal audit reports and evaluations by an external professional firm. Additionally, certain employees who play a significant role in the bank's accounting and financial reporting are suspected to be involved.

Today, the bank reported its first quarterly loss in at least 18 years, attributing it to suspected fraudulent activities by certain employees that resulted in accounting errors impacting its financial performance.

IndusInd disclosed in March accounting lapses in its derivative portfolio, which were estimated to have an adverse impact of approximately 2.35% of the bank's net worth as of December 2024.

Following this, the bank appointed external agency PwC to assess the impact on the bank's balance sheet, lapses at various levels and suggest remedial action.

On April 29, CEO Sumant Kathpalia and Deputy CEO Arun Khurana stepped down from their roles at the bank. In their absence, the IndusInd Board has appointed a Committee of Executives to manage the bank's operations until a new MD & CEO is in place or for a period of three months.

Furthermore, the bank's internal audit department (IAD) has identified "unsubstantiated balances" of Rs 595 crore in the "other assets" section of its balance sheet.

Q4 results

IndusInd Bank has reported a significant net loss of Rs 2,328.9 crore for the fourth quarter ending on March 31, 2025, due to increased provisioning and decreased income. The private sector bank faced challenges related to accounting discrepancies, microfinance fraud, and balance sheet issues during the same quarter, leading to internal audits, key resignations, and forensic investigations. This loss comes in stark contrast to the Rs 2,349.15 crore net profit the bank achieved in the fourth quarter of the previous fiscal year. 

In response to the current financial situation, the bank allocated Rs 2,522 crore for provisioning in the March quarter of FY25, a substantial increase from the Rs 950 crore provisioned in the same period in FY24.

In the fourth quarter of fiscal year 2025, the bank recorded a Net Interest Income (NII) of Rs 3,048.3 crore, with provisions totaling Rs 2,522.08 crore, compared to Rs 1,743.63 crore in the previous quarter.

The Gross Non-performing Asset (NPA) ratio for the bank was 3.13 percent in Q4FY25, an increase from 2.25 percent in Q3FY25 and 1.92 percent in Q4FY24. The Net NPA ratio for the March quarter was 0.95 percent, up from 0.68 percent in the previous quarter and 0.57 percent a year ago.

Shares of IndusInd Bank closed at Rs 771.10, down 1.39 per cent, on BSE.