In response to the sudden resignation of IndusInd Bank’s Managing Director and CEO, Sumant Kathpalia, the Reserve Bank of India (RBI) has cleared the formation of a temporary executive leadership structure to ensure operational continuity at the private lender.

In a stock exchange filing on Wednesday, IndusInd Bank confirmed that the RBI, via a letter dated April 29, has authorized the establishment of a "Committee of Executives" to oversee the bank's functioning during the transition. The move comes in the wake of Kathpalia’s exit, which he attributed to “moral responsibility” following the findings of an internal probe.

The newly formed interim committee will be led by two senior executives, Soumitra Sen, head of consumer banking, and Anil Rao, the bank’s chief administrative officer. The duo will jointly handle the responsibilities typically managed by the CEO for a period of up to three months or until a new CEO is appointed, whichever is earlier.

To support this temporary management, the bank’s board has also constituted an Oversight Committee. Chaired by the board chairman, the supervisory panel includes the heads of the audit committee, the nomination and remuneration committee, and the risk management committee. This group will guide the interim leadership and monitor governance standards during the transition.

The leadership reshuffle follows a forensic review conducted by audit firm Grant Thornton, which uncovered losses nearing Rs 2,000 crore linked to the bank’s derivatives operations. The discovery raised significant concerns about the institution’s risk controls and internal oversight.

CEO's Resignation

Kathpalia, whose term had just been extended by one year by the RBI in March, despite the board recommending a full three-year term, resigned Tuesday, citing accountability for the bank’s missteps. He had earlier expressed that the central bank’s decision to limit his tenure might have stemmed from concerns about the bank's derivatives exposure.

Adding to the turmoil, Deputy CEO Arun Khurana also tendered his resignation earlier this week in connection with the same issue. The dual resignations have intensified scrutiny on the bank’s risk management framework and the broader implications for corporate governance in India’s banking sector.