PwC finds ₹2,200cr hole in IndusInd treasury accounts
What's the story
A confidential review by PricewaterhouseCoopers (PwC) has flagged serious accounting lapses in IndusInd Bank's treasury operations. The 71-page report, commissioned by the bank itself, found that manual accounting entries were used to offset trading losses. This practice created a receivable pool of over ₹2,200 crore and inflated the bank's profit and assets by ₹1,817.58 crore. The review looked at transactions between April 1, 2023 and June 30, 2024.
Operational disconnect
Operational disconnect contributes to financial overstatement
The PwC report also highlighted a disconnection between the bank's risk management desk and trading desk. This operational disconnect contributed to the overstatement of financial figures. The review found that manual entries were posted by the treasury back office to offset losses incurred by the trading desk. As of March 31, 2024, these manual adjustments in the trading book created a corresponding receivable from ALM amounted to ₹2,201.76 crore.
Linkage issues
Lack of linkage complicates financial reporting
The PwC report also flagged a lack of direct linkage between internal deals made by the Asset Liability Management (ALM) Desk and external hedges executed by the Trading Desk. This gap further complicated the bank's financial reporting. The review examined over one million trades across seven product categories, including 331,387 internal transactions. It also looked at how well treasury platform Calypso integrated with core banking system Finacle in terms of configuration, monitoring and reconciliation processes.
Financial discrepancies
Unrealized losses and accounting errors further complicate situation
The PwC report also noted that forward contracts entered into by the ALM Desk with external counterparties were not marked to market at reporting dates. Instead, they were recognized only upon settlement. This led to unrecognized unrealized losses of ₹121.46 crore as of March 2024 and ₹161.43 crore as of June 2024 in the respective reporting periods. The review also flagged accounting errors for cross-currency swaps and swap-cost amortization, resulting in misstatements of ₹31.88 crore and ₹15.93 crore respectively.