IndusInd ropes in EY to conduct another audit, to probe Rs 600cr discrepancy in microfinance portfolio

Mumbai: The IndusInd Bank board has appointed EY to carry out a second forensic audit, specifically to investigate a ₹600 crore discrepancy related to the accrual of interest income in its microfinance portfolio, said two people with direct knowledge of the matter. The issue was flagged during the ongoing statutory audit for the last financial year, prompting the auditors to issue an additional communication under Section 143(12) of the Companies Act 2013, said one of the persons cited.

Checking for Fraud

The auditors then asked the bank to initiate a forensic audit into the Rs 600 crore discrepancy.

EY, which has India’s largest forensic practice, will conduct an investigation to see if there were any lapses and fix accountability. This is in addition to the forensic audit being conducted by Grant Thornton Bharat (GTB) to probe irregularities in the accounting of IndusInd’s forex derivatives portfolio.

IndusInd Bank, EY and GTB didn’t respond to queries.

“It is not an issue that spans multiple years. It seems to have occurred in the last financial year, possibly within the second and third quarter of the fiscal,” said one of the persons cited. “But EY will investigate if there was any fraud committed.”

A source within the bank has cited time constraints as the reason for roping in EY, with the GTB-led primary investigation given until April end.

An EY affiliate, SR Batliboi & Co., had previously served as the bank’s auditor (2018-2019) and EY consultants had helped the management review its derivatives portfolio in the March 2024 quarter.

IndusInd said in a stock market disclosure on April 15 that PwC, hired for an accounting review of the derivatives portfolio, had estimated potential losses from accounting anomalies at Rs 1,979 crore. That was higher than initial estimates that had pegged the expected loss at Rs 1,600 crore. But PwC’s report had substantial disclaimers, said the source quoted above.

The bank quantified the impact based on its June 2024 profit and loss. The adverse impact (on a post-tax basis) of 2.27% was based on IndusInd’s net worth as of December 2024.