Grant Thornton, which is currently conducting a forensic audit on IndusInd bank, has identified 25 employees—apart from the bank’s former Managing Director and Chief Executive Officer, Sumant Kathpalia, and deputy CEO Arun Khurana, also the head of global trade—as being responsible for serious accounting lapses in derivative instruments, according to highly placed sources.
Accounting Lapses in Derivative Instruments
These employees are mostly in the treasury department. This includes the Treasury Head and a few senior executives, a level or two below. People from across the department have been named in the Grant Thornton report. Sources say a few senior employees in the treasury department had brought the accounting practices to the management's notice.
“There is adequate communication trail to prove that the management was made aware of the likely implications of the accounting treatment on its financials,” said a highly placed source who didn’t want to be named.
Such employees are likely to be retained by the bank, while the others may be let go. While Moneycontrol could not independently ascertain the number of employees who may be sacked by the bank as an outcome of the GT report, a banker, on condition of anonymity, said at least 50 percent of employees identified in the GT report may be retained by the bank. “Those retained may be moved to a different department,” he added.
Emails to IndusInd Bank and Grant Thornton remained unanswered till the time of publishing this article.
Impact of the Lapses
On March 10, the bank’s former management team led by Kathpalia revealed in a call with investors about lapses in accounting for derivative instruments. Even as exact details of the lapses are yet to be confirmed by the bank, Kathpalia said these lapses had been happening over a span of seven years.
Sources say the lapses largely pertain to unhedged Japanese Yen contracts, which have historically helped the bank keep its cost of funds under check.
With the GT audit still ongoing and the global firm working along with the management to fix processes across the bank’s operations, including the treasury, people with knowledge of developments in IndusInd Bank say there could be more retrenchments and exits from the bank.
