IndusInd Bank And Past Experiences: When Sauce for Goose is not Sauce for Gander

Throughout the sixteenth Ashtapadi of Jayadevar’s Geetagovindam, Radha endeavours to establish that what is sauce for goose is not sauce for gander. She begins with the lament that a Gopika may be enjoying, reclining on a silky bed, but for her, such a mattress conjures up agonising pangs of separation from Krishna. Does RBI also have the liberty to follow double standards when it comes to assuaging the bank specific apprehensions of retail depositors?

In the late 1990s, when South India Cooperative Bank was put under liquidation, a similar sounding South Indian Bank, on the same day faced large withdrawal of deposits. The Bank, which had no adverse supervisory rigour at that point of time, desperately pleaded to RBI to issue a clarification that both banks were disparate entities. RBI turned the other way.

In 2008-09, when ICICI Bank defaulted on statutory reserve maintenance of Cash Reserve Ratio and faced the semblance of a run on it, RBI hastily gave a notification on the stability of the Bank. Maybe, A. Sethumadhavan, who was heading South Indian Bank at that point in time was a minnow in the eyes of RBI compared to the heft of K.V Kamath, who was heading ICICI Bank at the relevant point in time! Sethumadhavan is now more famous as a reputed and prolific writer, having won the Kendra Sahitya Academy Award in 2007. 

Fast forward to 2025. RBI, for reasons best known to themselves, approved the continuance of the CEO of IndusInd Bank Sumant Kathpalia for another year, unlike the three year extension they normally approve. He joins the likes of Rana Kapoor of Yes Bank, Viswa Vir Ahuja of RBL Bank and Shika Sharma of Axis Bank who got truncated extensions from RBI than what their Bank Board’s had recommended.

Subsequently, on the same day, the bank informs the Stock Exchanges of a likely hit in their P&L of an amount that exceeds the profit of the previous quarter, arising from misclassification of certain derivative contracts and attendant non-compliance of accounting guidelines of RBI. A very cryptic way of covering up losses from derivatives! Is the bank covering another Nick Leeson? But the stock market turned ruthless on the bank’s stock which has eroded nearly half of its recent peak. 

Unconfirmed reports indicate that SEBI is also likely to examine if the CEO and CFO engaged in insider trading. Both of them have sold their entire holdings in the bank during the last year. Yet, RBI found it apposite on 15th March 2025 to issue a statement on the financial stability of the Bank. The statement does not contain anything other than what is in the public domain about the Bank’s financials. A Capital to Risk Weighted Assets Ratio (CRAR) of 16.46% and Provision Coverage Ratio (PCR) of 70.20% or Liquidity Coverage Ratio (LCR) of 131%, carried in the RBI notification are already available in IndusInd Bank’s web site. 

The statement adds that the Bank has been directed to make appropriate disclosures after complying with prescribed accounting standards for derivatives and its health is being monitored by the RBI. Is not continuous monitoring of the bank the primary supervisory function of the regulator? 

So, to what end is this statement intended? Is protecting the stock price of the bank an agenda of the financial regulator, beyond ostensibly assuaging the fears of depositors?

Maybe, the sauce is on the wrong toast!