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Reserve Bank Governor Sanjay Malhotra on Friday expressed confidence in the current state of IndusInd Bank, saying the lender has shown progress after a difficult period marked by fraud and accounting irregularities.

Addressing the media, Malhotra said the resignation of Managing Director and CEO Sumant Kathpalia should be seen as a meaningful move in terms of accountability.

"The MD and CEO of the bank resigned, owning moral responsibilities. So, I thought that should be good enough. Do you expect that all the board members (should resign)... I think the MD and CEO, who is also a member of the board... has taken responsibility, that is at the board level itself," the Governor stated.

He also made it clear that while the RBI will continue monitoring the situation, any legal violations will be dealt with firmly, reported PTI. "The law will take its own course if there are any criminalities in the matter," he said.

Bank Compliance and Reforms Praised

Malhotra confirmed that the private sector bank, promoted by the Hinduja Group, has complied with all regulatory requirements during the crisis. The trouble began with the lender's microloan portfolio, and later extended to accounting discrepancies. These issues culminated in a record loss of Rs 2,329 crore for the fourth quarter of FY25 — the worst in the bank’s history.

“I think the bank has taken enough number of steps to improve their accounting and other practices, and on the whole, I think it is doing well,” Malhotra added.

Deputy Governor Swaminathan J echoed the sentiment, noting that IndusInd Bank, currently operating under interim leadership, has implemented all directions issued by the central bank. He said the bank conducted a forensic audit to pinpoint responsibility, ensured customer interests were protected, and initiated a succession plan.

Lessons for the Regulator

Swaminathan also highlighted the episode as a learning experience for the regulator. “There are a lot of learnings for the RBI from the crisis,” he said, adding that the central bank would now focus more on identifying early warning signs to prevent future lapses.

Following the RBI’s supportive remarks, IndusInd Bank’s shares closed 2.50 per cent higher at Rs 823.30 on the BSE, outperforming the benchmark index, which rose by 0.92 per cent.