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India’s stock market witnessed a sharp jolt on Tuesday as shares of IndusInd Bank plummeted by 25%, hitting a 52-week low of ₹674.55. The bank’s market capitalization eroded by approximately ₹16,000 crore in just two hours. This marks the most significant single-day decline for the stock since March 2020. The sell-off was triggered by the bank’s disclosure of accounting inconsistencies in its derivatives portfolio, raising concerns among investors and analysts.
What Led to the Crash?
IndusInd Bank admitted to discrepancies in its derivatives accounting, specifically in hedging costs linked to past foreign exchange transactions. As per reports, the bank may face a potential financial impact ranging between ₹1,600 crore to ₹2,000 crore—amounting to 2.35% of its net worth as of December 2024. This revelation severely dented investor confidence, driving the stock to its lowest level in more than three years.
Adding to investor anxiety, analysts raised concerns about the bank’s governance and risk management framework, intensifying negative sentiment around its financial stability.
Who Is Affected?
The primary impact is on IndusInd Bank and its shareholders. The stock has already lost 42% of its value over the past year, and this latest crisis has exacerbated fears of a continued downturn. The discrepancies were identified between September and October 2024, following new Reserve Bank of India (RBI) regulations on derivative accounting. However, the bank officially disclosed the issue on March 10, 2025, after a board meeting.
Investor confidence was already shaky as IndusInd Bank’s stock had fallen nearly 4% on Monday, following the RBI’s decision to extend the tenure of its CEO for only one year instead of the requested three-year term.
Wider Market Impact
The ripple effects of IndusInd Bank’s plunge were felt across the banking sector. The Nifty Bank index slipped 0.7%, while broader market indices also witnessed mild declines. Investors are now wary of banking stocks with exposure to complex derivatives, fearing similar governance risks.
Why Did IndusInd Bank Face This Crisis?
The issue stems from the bank’s underestimation of hedging costs related to foreign exchange transactions, which led to misstatements in its financial records. The RBI’s tightened guidelines on derivatives risk management brought these discrepancies to light, forcing IndusInd Bank to acknowledge potential losses.
How Is IndusInd Bank Responding?
To contain the fallout, the bank has launched an internal review and engaged an external agency to validate its findings. It has assured investors that its financial standing remains strong, with sufficient capital reserves to absorb the one-time loss. The financial impact is expected to be reflected in either Q4 FY25 or Q1 FY26 results.
With the stock market’s reaction still unfolding, all eyes are now on IndusInd Bank’s next moves and the upcoming regulatory response to prevent further turmoil.
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