IndusInd Deputy CEO Khurana quits over accounting lapses

Synopsis

IndusInd Bank's Deputy CEO, Arun Khurana, resigned amidst a Rs 1,959.98 crore loss from misaccounted derivative trades. This follows the bank's announcement of corrective actions against responsible employees and a senior management overhaul. The losses, stemming from incorrect accounting of internal derivative trades, have raised concerns about internal controls and risk management, impacting investor confidence.

Private lender IndusInd Bank on Monday announced the resignation of its Deputy Chief Executive Officer, Arun Khurana, amid ongoing scrutiny over a significant Rs 1,959.98 crore loss tied to misaccounted internal derivative trades.

The move comes just a day after the bank signaled its intent to take corrective action against employees responsible for the lapses and overhaul its senior management structure to reinforce accountability.

Khurana’s departure marks the first senior-level exit in the wake of the derivatives episode, which has not only impacted the bank’s bottom line but also raised serious concerns over internal controls, risk management, and corporate governance standards at one of India’s prominent private sector lenders.

"Considering the recent unfortunate developments, wherein the Bank determined an adverse accounting impact on P&L, on account of incorrect accounting for internal derivative trades, I having oversight of the Treasury Front office function, as the Whole Time Director, Deputy CEO and a part of Senior Management of the bank, hereby resign, effective immediately," Khurana's resignation letter shared with the stock exchanges stated.

He added that he was willing to assist with the transition process to ensure continuity and stability.

Khurana had been with IndusInd Bank since November 2011 and was also head of the Global Markets Group. With nearly three decades of experience, Khurana previously held senior roles at HSBC, ABN AMRO Bank, and later the Royal Bank of Scotland after ABN’s acquisition.

His resignation underscores the growing pressure on the bank’s leadership to accept responsibility for a crisis that has shaken investor confidence and attracted regulatory attention.

“The board is taking necessary steps to fix accountability of the persons responsible for these lapses and re-align roles and responsibilities of senior management," the lender's board had said on Sunday.

According to the bank, the losses stemmed largely from incorrect accounting of internal derivative trades, especially in cases where contracts were terminated early. These errors led to inflated notional profits, masking the true financial state of the derivatives portfolio over multiple reporting periods.

To address the situation, the bank announced on March 21 that it had appointed an independent firm to conduct a comprehensive audit of its derivatives book and establish management accountability.

The issue first came to public attention on March 10, when IndusInd revealed that mark-to-market (MTM) losses in its derivatives portfolio could reduce its net worth by as much as 2.35%—roughly Rs 1,600 crore—as of December 2024. The disclosure triggered a sharp sell-off, with the bank’s stock tumbling nearly 25% from Rs 900 to Rs 686.

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