Awaiting an end to IndusInd Bank's ₹1,500 cr derivative loss saga

If any Mickey Mouse accounting goes on for years in the treasury, it would, however, be with the knowledge of the mid-office that monitors — or, is supposed to monitor — the risks and reports any breach to the treasurer and chief risk officer. In the sequence and hierarchy of these divisions that witness millions of bond, currency and derivative deals, the front office 'creates' the risk to make money, the mid office 'keeps tabs' of positions, and the back office records and reconciles. In some ways, a treasury is a bank within a bank.

Among this cast of characters, some (directly reporting to the kingpin) would be typically aware of sharp practice; many lower in the ranks would blindly do what's told to them; and some would look the other way while letting the music go on. The army of auditors scrutinising the books, and probably call records and chats of IndusInd Bank officials, will have to ferret out exact quantum of losses, gaps in processes, and why the funny divergent accounting — booking profits while deferring losses of mirror derivative transactions — went on since 2016. It would hint who knew what, whether conflicted reporting arrangements fuelled the folly, and whether someone from the back office had ever raised a red flag.

When the bank's ₹1,500 cr derivative loss — analysts are awaiting the final number from PwC's review and Grant Thornton's (GT) forensic audits — hit the headlines, many in the bank involved in the dreary businesses of giving loans, raising deposits and selling cards were as