PwC review flags accounting irregularities in IndusInd Bank treasury operations
A confidential PwC review reportedly found that manual treasury entries at IndusInd Bank offset trading losses and created a Rs 2,201.76 crore receivable pool. The findings have raised fresh questions over hedging links, accounting treatment and controls around manual adjustments.
Fresh questions have emerged around IndusInd Bank's treasury operations after a confidential review by consulting firm PwC found accounting lapses that led to an overstatement of the bank's profits and assets, reported The Economic Times (ET).
According to a report, manual accounting entries were used to offset trading losses in the bank's treasury operations. The exercise allegedly created a receivable pool of more than Rs 2,200 crore and resulted in profits and assets being overstated by Rs 1,817.58 crore.
The findings relate to transactions carried out between April 1, 2023 and June 30, 2024.
The 71-page report was commissioned by IndusInd Bank to examine the accounting treatment of derivative trades undertaken by its treasury desk. PwC was hired in October 2024 and submitted its findings in April 2025, according to the report.
WHAT PwC FOUND
At the heart of the review was the relationship between two important treasury functions within the bank.
The Asset Liability Management (ALM) Desk is responsible for managing balance sheet risks, while the Trading Desk executes transactions in financial markets.
According to the PwC review, there was no direct linkage between the two functions when it came to certain transactions and hedging activities.
The report reportedly found that the treasury back office posted manual accounting entries to offset losses generated by the trading desk.
As of March 31, 2024, these manual adjustments had created a receivable from the ALM Desk amounting to Rs 2,201.76 crore.
After adjusting for Rs 384.18 crore of swap-cost amortisation recorded by the ALM Desk, PwC concluded that the accounting treatment led to an overstatement of profits and assets worth Rs 1,817.58 crore.
"The bank cannot clearly establish whether the on-balance sheet assets and liabilities of the bank, although covered by ALM at an intra-bank level, are hedged externally at bank level," the report said, according to The Economic Times.
PwC also reportedly noted that in the absence of a direct link between internal transactions and external hedging deals, it was difficult to establish whether exposures taken by the ALM Desk were properly hedged.
MORE ACCOUNTING ISSUES FLAGGED
The review reportedly identified additional issues beyond the manual adjustments.
According to report, PwC found that forward contracts entered into by the ALM Desk with external counterparties were not marked to market at reporting dates. Instead, gains and losses were recognised only when the contracts were settled.
As a result, unrealised losses of Rs 121.46 crore as of March 2024 and Rs 161.43 crore as of June 2024 were not recognised during the relevant reporting periods.
The report also flagged accounting errors related to cross-currency swaps and swap-cost amortisation.
These resulted in alleged misstatements of Rs 31.88 crore and Rs 15.93 crore, respectively.
REVIEW COVERED OVER ONE MILLION TRADES
PwC's review was extensive.
The consulting firm examined more than one million trades across seven different product categories. The exercise included scrutiny of 331,387 internal transactions.
The review also looked at the interaction between treasury platform Calypso and core banking platform Finacle, including system configuration, monitoring and reconciliation processes.
CONCERNS OVER MANUAL ENTRIES
One of the key concerns raised in the report relates to manual accounting adjustments.
PwC reportedly warned that stronger controls and governance mechanisms were needed around manual entries and out-of-system adjustments.
The report said weaknesses in maker-checker reviews and a lack of adequate controls over manual entries could result in inaccurate accounting records.
According to the report, there were not enough checks in place to prevent errors or potential misuse when manual changes were made in the system.
Neither IndusInd Bank nor PwC immediately responded to queries regarding the report.
The joint statutory auditors of IndusInd Bank during the period under review were MSKA & Associates and MP Chitale & Co.
The report adds another layer to the scrutiny around accounting and treasury operations at private sector banks, highlighting the importance of strong internal controls, transparent accounting practices and effective oversight of complex treasury transactions.