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Besides the manual adjustments, PwC identified lapses in foreign exchange forward accounting, cross-currency swap accounting and swap-cost amortisation.At the centre of the findings was the absence of a direct link between the bank's Asset Liability Management (ALM) Desk, which manages balance-sheet risks, and the Trading Desk, which executes market transactions.PwC found that the treasury back office posted manual entries to offset losses incurred by the trading desk.
"In the absence of a direct linkage of an external deal to the internal deal, it is not possible to designate the exposure taken on from the ALM desk as being hedged externally.
"Need for robust controls and related governance mechanisms for manual entries and out of system adjustments.
Lapses in maker check review and overall lack of control over the manual entry process can result in inaccurate entries being posted."
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Mumbai: A confidential PricewaterhouseCoopers (PwC) review of IndusInd Bank 's treasury operations found that manual accounting entries were used to offset trading losses, creating a receivable pool of more than ₹2,200 crore and overstating the bank's profit and assets by ₹1,817.58 crore.ET reviewed a copy of the PwC report, commissioned by the bank to review the accounting treatment of derivative trades entered into by its treasury desk.The 71-page report examined transactions between April 1, 2023 and June 30, 2024. Besides the manual adjustments, PwC identified lapses in foreign exchange forward accounting, cross-currency swap accounting and swap-cost amortisation.At the centre of the findings was the absence of a direct link between the bank's Asset Liability Management (ALM) Desk, which manages balance-sheet risks, and the Trading Desk, which executes market transactions.PwC found that the treasury back office posted manual entries to offset losses incurred by the trading desk."As of March 31, 2024, the manual adjustment booked in trading book by creating a corresponding receivable from ALM amounted to ₹2,201.76 crore," the report said.After adjusting for ₹384.18 crore of swap-cost amortisation recorded by the ALM Desk, the entries resulted in an overstatement of profit and assets of ₹1,817.58 crore.PwC found there was no direct linkage between internal deals entered into by the ALM Desk and external hedges executed by the Trading Desk.Both PwC and IndusInd spokespersons did not respond to queries immediately. PwC was hired in October 2024 and it had submitted the report in April 2025.The joint statutory auditors of IndusInd for the period in question were MSKA and Associates and MP Chitale & Co."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. "In the absence of a direct linkage of an external deal to the internal deal, it is not possible to designate the exposure taken on from the ALM desk as being hedged externally."The review covered more than one million trades across seven product categories, including 331,387 internal transactions, and examined the interface between treasury platform Calypso and core banking system Finacle, including configuration, monitoring and reconciliation processes.PwC also found that forward contracts entered into by the ALM Desk with external counterparties were not marked to market at reporting dates and were instead recognised only upon settlement. 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 in the relevant reporting periods.The report also flagged errors in accounting for cross-currency swaps and swap-cost amortisation, resulting in misstatements of ₹31.88 crore and ₹15.93 crore, respectively.There are not enough checks to stop mistakes or fraud when people make manual changes in the system. "Need for robust controls and related governance mechanisms for manual entries and out of system adjustments. Lapses in maker check review and overall lack of control over the manual entry process can result in inaccurate entries being posted."
