IndusInd's troubles are deeper than just a financial misstep

IndusInd Bank investors were in for a sharp and shocking blow on March 11, 2025, one that would see their holdings shrink by over a quarter in just a single day. What caused this dramatic fall was an accounting error, one that wiped out nearly Rs 1,600 crore of the bank's net worth, roughly 2.35 per cent of its equity. This had to do with how the bank accounted for certain foreign currency derivative transactions. The crisis, however, is not due to the financial hiccup alone. After all, the bank isn't facing a liquidity crisis and the financials will likely stabilise once the discrepancy is cleared in Q4 FY25. The problem is deeper. It's more about the bank's credibility and governance practices. This incident is just the latest in a long series of issues that have plagued the bank's reputation over the years. And this, more than the numbers themselves, might just be what investors need to pay attention to. But first, let's understand how the accounting lapse came about. What went wrong? IndusInd Bank has been using derivatives to hedge foreign currency risk. The error arose from using two different ways to account for these derivatives: The external method: The bank's trading desk with ex