Amid probe, IndusInd Bank gets promoter Hindujas' backing

MUMBAI: Amid a probe by markets regulator Sebi, IndusInd International Holdings (IIHL), the original promoter of IndusInd Bank, on Thursday reaffirmed its support for the bank's board and management following the disclosure of a large-scale accounting fraud in the March quarter and vowed to pump in equity capital, if required.

Ashok Hinduja, chairman of IIHL, said he had "continued, unequivocal trust in the chairman and board of directors of the bank for their appropriate, swift actions in order to address discrepancies and attendant areas of concern." He said the management, under the board's supervision, had preserved capital strength and maintained the bank's core business.

"This shall be a new dawn with a sanitised slate to regain the position the bank enjoyed for many decades," Hinduja said in a statement.

Despite the bank posting a net loss of Rs 2,329 crore in the March quarter-its worst performance in two decades-IndusInd Bank's shares closed 1.8% higher on Thursday at Rs 785.10, recovering from a nearly 6% intraday fall. Analysts, however, remained cautious amid indications that the disclosure of a fraud coud put the bank and its key functionaries under spotlight once again. Other agencies may also enter the scene to probe the fraud.

Suresh Ganapathy of Macquarie said, "We need to look at every line item with a fine tooth comb and wait for business to stabilise and see what the eventual loan mix would be and what the priorities of the new CEO are."

In Delhi, Sebi chairman Tuhin Kanta Pandey said the regulator was examining "egregious violations" by senior IndusInd Bank officials. He said RBI would address supervisory aspects, while Sebi was looking into potential breaches in the securities market domain. "The RBI is looking into whatever Sebi has to do in relation to...whatever Sebi's remit is...Sebi is doing... If there are any egregious violations by anyone in their capacity, Sebi is looking into it," Pandey told reporters on the sidelines of an event organised by Assocham.

The bank has reported the matter to investigative agencies and the govt. An internal audit found that senior officials, including former key management personnel, had overridden internal controls across the derivatives and microfinance portfolios. The impact of irregularities has been pegged at Rs 3,400 crore, including a Rs 1,960 crore misstatement in derivative trades, Rs 674 crore in interest income reversals, and a Rs 172 crore fraud in MFI operations.