India’s stock market turmoil deepened on Tuesday as IndusInd Bank shares nosedived 25%, hitting a 52-week low of ₹674.55 losing approx. 16000 market cap in just 2 hours. This dramatic drop—the steepest since March 2020—came after the bank admitted to accounting discrepancies in its derivatives portfolio, triggering panic among investors and analysts alike.
With concerns mounting over the bank’s internal controls and the possibility of a ₹1,600-2,000 crore impact on its net worth, the stock took a severe beating. But what exactly led to this crash, and what does it mean for investors?
What Happened?
IndusInd Bank disclosed inconsistencies in its derivatives accounting, revealing that it had underestimated hedging costs associated with past forex transactions. As a result, the bank faces a potential financial impact of up to ₹2,000 crore, equivalent to 2.35% of its net worth as of December 2024, according to an ET report.
This revelation shook investor confidence, causing the stock to plummet to its lowest level in over three years. Analysts have raised red flags about weak governance and internal controls, further denting sentiment around the bank’s financial health.
Who is affected?
The biggest blow is to IndusInd Bank and its shareholders. The bank’s stock has already shed 42% over the past year, and this latest crisis has intensified fears of further downside. Analysts are now questioning the bank’s risk management framework and compliance standards.
The discrepancies were detected between September and October 2024, following the Reserve Bank of India’s (RBI) revised guidelines on derivatives. However, the bank officially disclosed the issue in an exchange filing on March 10, 2025, following a board meeting.
Notably, IndusInd Bank’s stock had already begun to weaken on Monday, closing nearly 4% lower after the RBI granted only a one-year extension to its CEO’s tenure, instead of the three-year term sought by the bank.
Where is the impact visible?
Beyond the IndusInd Bank stock collapse, the broader banking sector also faced mild tremors. The Nifty Bank index slipped 0.7%, while the Nifty 50 declined by 0.27%. This development may erode investor confidence in banking stocks, especially those with complex derivatives exposures.
Why did IndusInd Bank face this crisis?
The root of the issue lies in foreign exchange transactions where IndusInd Bank underestimated hedging costs, leading to incorrect valuations in its books. The RBI’s stricter guidelines on derivatives risk management exposed these discrepancies, forcing the bank to acknowledge potential financial losses.
How is IndusInd bank responding?
To contain the fallout, IndusInd Bank has initiated a thorough internal review and has engaged an external agency to validate its findings. The bank reassured investors that it remains financially strong, with sufficient capital to absorb the one-time loss, which will be reflected in either Q4 FY25 or Q1 FY26 financial results.
