Indusind Bank: One More Disturbing Lapse of Judgment by the “Banker of the Year”

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EXECUTIVE SUMMARY. Romesh Sobti, the CEO of Indusind Bank, was recently crowned ‘banker of the year’ by a fawning business media, despite reporting two consecutive years of fudged accounts (FY2016 and FY2017) and putting nearly 8% of the bank’s capital at risk in an ill-advised, unsecured loan to the insolvent IL&FS. We find that the lauded banker is also grappling with a Rs 5 bn loan to the liquidity-constrained investment company of the founder of the Essel media group (flagship, Zee Entertainment Enterprises). It remains a mystery why Indusind Bank gave such a high-risk loan in end-April 2018 and secured it against an illiquid, optionally convertible security of an unlisted associate company. To date the loan appears to barely retain its ‘standard’ classification, but the investment companies of the Zee founders have brought considerable grief to the mutual fund industry, exposing their poor credit appraisal and risk management policies. If the Zee founders are unable to divest assets and sell part of their holding in the flagship listed company, Indusind Bank shareholders will share the grief of the investors in debt mutual funds who had subscribed to the ill-fated paper issued by companies of the Zee founders. It is time the banking regulator also closely monitored the credit and risk systems at Indusind Bank. The coveted laurel gracing the head of Indusind Bank’s CEO may turn out to be a crown of thorns for stakeholders of the bank, exposing once again the credit appraisal and risk mitigation policies in this bank.

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