Losses shown as receivables in IndusInd Bank case

When a bank takes a foreign-currency exposure, the trading desk of the bank needs to hedge while converting it into rupees.

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There is a cost in hedging. The trading desk transfers the cost to the asset-liability management (ALM) desk. When the foreign currency exposures are repaid, there could be either a gain or loss. In IndusInd Bank's case, the losses were shown as receivables, which were included in the intangible assets in the balance sheet.

In other words, the bank needed to make provisions, which were not made, banking sources said. When the RBI's "Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023," came into effect from April 1, 2024, the bank found it difficult to comply with the norms due to its accounting practices.