RBI Signals Better Days Ahead For IndusInd Bank, Lender's Shares Rally

RBI Deputy Governor J Swaminathan said that things should return to normal at IndusInd Bank soon. This reassurance came as a relief to investors and pushed the stock higher.

The bank has been under pressure since March, when it disclosed that incorrect accounting of internal derivative trades had caused a $230 million loss for the financial year that ended on March 31.

Source : Justdial

Shares of IndusInd Bank rose as much as 5.3 per cent on Friday, after the Reserve Bank of India (RBI) said the problems at the private sector lender are likely to settle soon.

However, the stock later gave up some of its early gains. During mid-day trade, around 1:45 pm, IndusInd Bank shares were seen consolidating and were trading at Rs 827.85, up by Rs 24.65 or 3.07 per cent on the National Stock Exchange (NSE).

The bank had been facing scrutiny due to past accounting issues.

RBI Deputy Governor J Swaminathan said that things should return to normal at IndusInd Bank soon.

This reassurance came as a relief to investors and pushed the stock higher, making it one of the top gainers on the Nifty Bank index, which itself rose over 1.5 per cent following an interest rate cut and changes to the cash reserve ratio announced earlier in the day.

RBI Governor Sanjay Malhotra also spoke positively about the bank during a press conference after the central bank’s monetary policy meeting.

He said IndusInd Bank has taken enough steps to fix its accounting practices and is doing well overall. "IndusInd Bank has taken enough steps to improve accounting practices. The bank is doing well on the whole," said the RBI Governor.

He also noted that the resignation of the bank’s top executives should be “good enough” to bring things under control.

The bank has been under pressure since March, when it disclosed that incorrect accounting of internal derivative trades had caused a $230 million loss for the financial year that ended on March 31.

In addition, an internal audit found that about $80 million in interest income from its microfinance business was wrongly recorded over three quarters. The bank reversed this in January.

Following these revelations, IndusInd Bank’s CEO Sumant Kathpalia and his deputy Arun Khurana resigned in April.

RBI Deputy Governor Swaminathan said that everything that was supposed to play out over the last three months is more or less on track and that stability is returning to the lender.

Despite today’s gains, IndusInd Bank’s stock is still down about 6 per cent since the first disclosure of the accounting issues. In comparison, the Nifty Bank index has risen by 17 per cent during the same period.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)