Ashok Hinduja, chairman, IndusInd International Holding, told the press recently:
“Could you have as a promoter taken steps to avert the crisis at IndusInd Bank?
Money had not gone out. The profitability that was created was an accounting lapse. Authorities haven’t concluded whether this was intentional or unintentional. But a trust issue has come in. As an institution, we have confidence that with the right management bank will grow. The new MD has already built confidence with customers. He has also changed a lot of senior management who are either retired or have been asked to go. A new chairman is also going to come in by January. The board is undergoing a restructuring; some new board members will come in [emphasis ours]. So, as a promoter, I am very comfortable that it may take another few months, a few quarters, but the bank will come back.
Is there any plan to bring in a strategic investor?
Yes, we ourselves are looking. We don’t want private capital coming in and exiting. We are looking for a strategic partner with global expertise who wants to come in as a minority investor. IHL will not be diluting its stake.” – Economic Times, December 4, 2025.
There was one hitch. Hinduja had no right to make this announcement.
While IndusInd Bank immediately issued a release to the exchanges on December 4, denying the news of the bank looking for a strategic partner it did not deny that a new chairman of the board is likely to take charge or that new directors are likely to be appointed. Although the bank did not issue a release on the longevity of Sunil Mehta as chairman of the bank, Reuters on December 10, 2025, citing unnamed sources, stated that Mehta would be stepping down as chairman after his term ended on January 30, 2026.
Sunil Mehta was appointed as chairman, IndusInd Bank from January 31, 2023 for a period of 3 years ending January 30, 2026. The Reserve Bank of India (RBI) permits independent directors on bank boards for a continuous period of 8 years, and after a gap of 3 years, the individual can be re-appointed as a director till the age of 75. Sunil Mehta is 68 years of age, and is eligible to be re-appointed for another term. Hence the news that the chairman was not staying on for a second term is very material, especially in the light of the unsavoury incidents that have happened in the bank.
The problem is that Ashok Hinduja has no authority to make any statements on behalf of IndusInd Bank, whether it concerns the board considering a strategic investor or the reconstitution of the board. IndusInd International Holdings Ltd., which he chairs, holds 12.1% in Indusind Bank. The remaining promoter holding is held by IndusInd Ltd., aggregating to the promoter holding of 15.8% on a diluted basis as of September 30, 2025.
Ashok Hinduja is not on the board of directors of IndusInd Bank. Nor do the promoters have a nominee director. Sudip Basu, President, Group Risk at Hinduja Group Limited is a non-executive non-independent director on the bank, and is not a nominee director of the promoters. Indeed the special resolution which proposed amending the Articles of Association of IndusInd Bank by allowing the promoters to appoint two nominee directors did not even get a simple majority and was decisively rejected by shareholders on August 29, 2025.
Resolution No. 8 to Amend the Articles of Association
Source: IndusInd Bank
Regulation 31B The Securities and Exchange Board of India’s (SEBI) Listing Obligations and Disclosure Requirements, Regulations, 2015 (LODR) provides special rights to shareholders (like promoters), which need to be approved by a special resolution by the shareholders. However, in the case of IndusInd Bank there is no such right for the promoters to get Unpublished Price Sensitive Information (UPSI) from the bank. What this arrangement reveals is that the promoters and Ashok Hinduja, apart from voting on resolutions, have no formal mechanism to either exercise their control on the board of directors or to receive privileged information pertaining to confidential board decisions and deliberations.
IndusInd Bank has to date not issued any statement on whether Sunil Mehta will seek reappointment for a second term as chairman of the board. If the bank issues a notice to shareholders that Mehta will be stepping down as chairman it will indicate that Ashok Hinduja not only has access to UPSI but is publicly and brazenly announcing the same to the media. The fact that the chairman of IndusInd Bank’s board would not be opting for a second term is highly material information which should be announced by IndusInd Bank, and not by an individual who is identified as a promoter. This is not only a violation of SEBI’s LODR 30 but is also a very serious corporate governance issue.
In any company, the board of directors is the highest authority, and the chairman of the board sits at the pinnacle of the governance structure. Selecting the chairman is the prerogative of the board, and in a private sector bank this also requires the approval of the RBI. For an individual who chairs a company which has around 12% ownership of the bank, and is not a director, to state to the media that the bank’s board is going to be restructured, and that a new chairman and additional directors are going to join, is a grave travesty of governance. If this news proves to be factual it suggests that there is a very powerful non-constitutional authority in the bank which supersedes the board, and that the board and its chairman are only ceremonial name plates.
In such circumstances stakeholders in IndusInd Bank need to know where the centre of power is: is it with the bank’s board of directors, or is Ashok Hinduja the real power centre, and the board of directors merely a facade? The composition of IndusInd Bank’s board clearly reveals there is no formal mechanism for Mr Ashok Hinduja (apart from voting on shareholder resolutions) to either influence the board or to get privileged information, as the promoters have no formal representation on the board, nor any agreement to access privileged information.
IndusInd Bank is at a very crucial juncture, as it recovers from a major credibility issue of mis-stated accounts and poor controls, with a board of directors who were unaware of the state of affairs for a decade. Multiple state agencies are investigating the bank. New executives are being appointed and stakeholders need to know whether the executive management is reporting to the board of directors, or in effect to an unconstitutional authority.
If the news is confirmed that Sunil Mehta is relinquishing the chairmanship and is not continuing for a second term, and that additional directors are being inducted, as Ashok Hinduja had stated in the interview, then both SEBI and the RBI need to investigate how an outsider to the board is not only aware of confidential board discussions, but is also brazenly announcing such developments to the media prior to an official disclosure. Commercial banking is a strategic industry, and India cannot afford its private sector banks being governed as the personal jagirs of promoters as the board of directors and regulators remain mere bystanders.
This article was also published in The Wire and can be read here
_______________________________________________________
DISCLOSURE
I, Hemindra Kishen Hazari, am a Securities and Exchange Board of India (SEBI) registered independent research analyst (Regd. No. INH000000594). BSE Enlistment No. 5036. Please see SEBI disclosure here. Investment in securities market are subject to market risks. Read all the related documents before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The securities quoted are for illustration only and are not recommendary. I own equity shares in IndusInd Bank. Views expressed in this Insight accurately reflect my personal opinion about the referenced securities and issuers and/or other subject matter as appropriate. This Insight does not contain and is not based on any non-public, material information. To the best of my knowledge, the views expressed in this Insight comply with Indian law as well as applicable law in the country from which it is posted. I have not been commissioned to write this Insight or hold any specific opinion on the securities referenced therein. This Insight is for informational purposes only and is not intended to provide financial, investment or other professional advice. It should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.
