IndusInd Bank Shares Fall Following Additional Surveillance Measures Amid Derivatives Discrepancy
March 13, 2025 – BSE, Mumbai – IndusInd Bank Ltd faced a significant decline in its share price, closing at ₹672.10, down ₹12.60 or 1.84% on the Bombay Stock Exchange (BSE) today. This drop occurs in the backdrop of the National Stock Exchange (NSE) placing the private lender under the Additional Surveillance Measure (ASM) Stage 1 framework, a regulatory action that raises concerns about the stock’s volatility and trading practices.
Disclosure of Accounting Discrepancies
The decision to impose surveillance measures follows the bank’s recent announcement regarding discrepancies identified within its derivatives portfolio. In an internal review disclosed on Monday, the bank projected an adverse impact of approximately 2.35% on its net worth by December 2024 as a result of these discrepancies. Sumant Kathpalia, the bank’s CEO and Managing Director, indicated that the issues were recognized around September-October of the previous year. IndusInd Bank has informed the Reserve Bank of India (RBI) about this development and is in the process of commissioning an external agency to conduct a thorough evaluation, with findings expected by early April.
Kathpalia elaborated during an analyst call that these discrepancies have emerged over a span of 5 to 7 years, predating April 1, 2024. Notably, the issues related to the bank’s treasury business went undetected despite multiple audits conducted by the bank itself, as well as oversight from internal, statutory, and compliance auditors, including the RBI.
Understanding the Additional Surveillance Measure
The ASM Stage 1 framework is a precautionary measure implemented by Indian stock exchanges aimed at monitoring stocks that exhibit unusual price movements or volatility. When a stock is categorized under this framework, it is subjected to increased scrutiny, requiring investors to adhere to a 100% margin requirement for trades. This regulatory protocol seeks to mitigate risks associated with speculative trading and to uphold market integrity.
Under Stage 1 ASM, shares are also restricted by a daily price band of 5%, which is designed to prevent significant fluctuations in stock prices. A stock remains under ASM until the relevant concerns are satisfactorily addressed, allowing for its removal from the framework once stability is restored.
Market Reactions and Future Outlook
As the implications of the derivatives accounting issues unfold, market analysts are closely monitoring IndusInd Bank’s performance. Some industry experts have suggested that the accounting discrepancies may not be confined solely to IndusInd Bank, raising broader concerns regarding the sector.
In February, just prior to this accounting crisis, mutual funds reportedly sold IndusInd Bank shares worth ₹1,600 crore, highlighting a lack of confidence in the institution’s financial management among institutional investors.
As investors and analysts await further updates from the bank, the focus will remain on the completion of the external agency’s report and the potential for recovery in IndusInd Bank’s share stability amidst increased regulatory scrutiny.
For continuous updates on IndusInd Bank and other financial news, stay tuned to Smart Money Mindset.
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