Sumant Kathpalia resigns as IndusInd Bank CEO with immediate effect

IndusInd Bank's Managing Director and Chief Executive Officer Sumant Kathpalia has tendered his resignation, the bank said on Tuesday.

This comes after Arun Khurana, Deputy Chief Executive Officer of IndusInd Bank, filed his resignation from the bank yesterday.

Kathpalia takes responsibility for the derivatives accounting lapses. "I wish to submit my resignation from the services of the bank in relation to the ongoing derivatives discussion. I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice. I would request that my resignation be taken on record at the close of working hours today," he said in the letter to IndusInd Bank's Board of Directors.

Kathpalia's exit marks the third high-profile resignation from the private sector lender.

On March 7, the Reserve Bank of India (RBI) had granted only a one-year extension to Sumant Kathpalia, managing director (MD) and chief executive officer (CEO), IndusInd Bank. This was despite the bank’s Board had requesting a three-year reappointment.

“This would have had an impact because it (RBI) was aware of the issue. There was some inkling of the issue. I don’t know the rationale behind them giving me a one-year extension. But I think it is uncomfortable with my leadership skills in running the bank, and we have to respect that,” Kathpalia said after RBI's decision to extend his tenure only by one year.

When the RBI’s “Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023,” came into effect from April 1, 2024, the bank found it difficult to comply with the norms due to its accounting practices.

The bank has been grappling with unaccounted losses in the derivatives segment, which has led to a loss of almost Rs 2,000 crore.

On Sunday, IndusInd Bank informed the exchanges that Grant Thornton, an independent accounting firm hired by its board to investigate the cause of discrepancies in the derivative portfolio, had identified incorrect accounting of internal derivative trades. This led to a loss of Rs 1,959.98 crore.

Sumant Kathpalia is a banker with over 30 years of experience in the banking sector. He has worked with major multinational banks such as Citibank, Bank of America, and ABN AMRO before joining IndusInd Bank.

Kathpalia has been part of the core leadership team at IndusInd Bank for 12 years.

Kathpalia is a qualified Chartered Accountant and holds a B.Com (Hons.) degree from Hindu College, Delhi University.