Shares of IndusInd Bank saw a significant increase of almost 5% today following reports that the bank has initiated steps to recover salaries and bonuses from its former top executives due to misconduct and accounting misreporting. As of 1:20 pm, IndusInd Bank’s shares were up by 4.38% at Rs 862.05 on the Bombay Stock Exchange (BSE), with robust trading volumes continuing throughout the afternoon.
An internal investigation revealed financial reporting and compliance issues, leading the bank to start the process of reclaiming pay and incentives from ex-CEO Sumant Kathpalia and former deputy CEO Arun Khurana. Both executives departed in May after the disclosure of inaccurate accounting related to derivative trades, resulting in a $230 million (Rs 1,900 crore) impact on the bank’s finances.
The Securities and Exchange Board of India (SEBI) is currently probing Kathpalia and Khurana for suspected insider trading and accounting irregularities, with the pair prohibited from engaging in securities markets until the investigation concludes. The bank’s board is seeking legal advice to ascertain accountability based on internal regulations and Reserve Bank of India (RBI) directives, viewing the situation as involving financial discrepancies, regulatory penalties, control failures, and non-compliance that harmed the bank’s reputation and finances.
The clawback process may span from December 2023 to March 2025, with the exact amount to be recovered remaining undisclosed. Kathpalia’s fixed pay in the bank’s FY25 annual report was Rs 7.5 crore, while Khurana received Rs 5 crore, in addition to Kathpalia exercising 248,000 stock options during the year.
IndusInd Bank’s new leadership stated plans for a comprehensive organizational revamp before the next fiscal year to enhance financial and compliance frameworks. Concurrently, the bank appointed Amitabh Kumar Singh as Chief Human Resources Officer (CHRO), effective November 10, bringing in his extensive experience from the ICICI Group to bolster the senior management team.
Investors are responding positively to the clawback initiative and management changes, anticipating enhanced governance and tighter oversight post a challenging period for the bank. IndusInd Bank’s stock has surged over 10% in November, surpassing the broader Nifty Bank index, reflecting optimism surrounding the ongoing restructuring and leadership adjustments.