IndusInd accounting lapse row: CEO’s exit may point to more issues, hit recovery, margins

Analysts who flagged these risks said the bank’s board should appoint a private-sector banker as the new CEO, as public sector bankers may lack the necessary expertise to manage key portfolios such as vehicle finance, microfinance and gems and jewellery, which are critical components of IndusInd’s business.

“In light of the CEO’s exit, we expect to see increased business disruptions and margin pressures, including the risk of another round of deposit outflows,” said Anand Dama, head of BFSI at Emkay Global Financial Services.

“I feel the bank has lost at least a year’s worth of business in the absence of a credible CEO,” said Ashutosh Mishra, head – Institutional Equities Research at Ashika Stock Broking. “I fear there could be more skeletons in the cupboard that could be unearthed when the new management takes in.”

Kathpalia’s resignation comes just weeks after the bank disclosed discrepancies in its derivatives portfolio that caused a ₹1,960-crore loss. His departure follows closely on the heels of his deputy Arun Khurana’s resignation. In his resignation letter, Kathpalia took full moral responsibility for the lapses, which have shaken the fifth-largest private sector lender by assets that has a market cap of ₹65,000 crore.

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IndusInd Bank’s asset quality has been under pressure in recent quarters, with the gross non-performing asset ratio rising to 2.25% in the fourth quarter of 2025 from 1.9% a year earlier, primarily due to stress in the microfinance sector. Its share price plunged to a 52-week low of ₹605 after the revelations on March 11, more than half its peak of ₹1,550. The stock closed nearly flat at ₹838.45 on BSE ON Wednesday.Suresh Ganapathy, head of financial services research at Macquarie Capital, also questioned the bank’s board. “With such an illustrious board of so many board members, it is surprising what has happened. The chairman is Sunil Mehta, who, in fact, was appointed by the government on Yes Bank board when it became insolvent in order to save and revive the bank,” he wrote in a research note.