The Reserve Bank of India (RBI) has asked the IndusInd Bank board to propose names of two external candidates for the positions of Chief Executive Officer and Chief Operating officer, according to sources familiar with the matter.This development comes after the banking regulator last week approved a one-year extension for Sumant Kathpalia’s reappointment as CEO. Kathpalia’s term, originally set to end on March 24, 2025, will now conclude on March 23, 2026.RBI & IndusInd Bank did not respond to an email query seeking clarification.The bank’s board had initially approved a three-year term for Kathpalia in September 2024. However, this is the second instance in which the RBI has granted a shorter tenure than proposed by the board. In March 2023, the RBI had approved a two-year term instead of the three years recommended by the bank.In a recent analyst call Kathpalia had addressed concerns around his tenure, adding that the banking regulator might have had reservations about his leadership skills.“I don't know what is the rationale for them (RBI) to give me one year, but I think they're uncomfortable with the way my leadership skills of running the bank is, and we have to respect that,” he said. “And I think this is a test for the bank, as well as from a succession point that we see how to take the bank forward. I remain committed for one year to the bank. The board will evaluate external and internal candidates for CEO position. I don't know whether they evaluate me, or whether they evaluate somebody else. That's for the board to decide.”IndusInd Bank disclosed on Monday that it has launched an internal review of a portion of its derivative portfolio after discovering discrepancies in account balances. The bank estimates these discrepancies could result in a financial impact of approximately 2.35% of its net worth, with analysts projecting a potential loss of nearly Rs 1,600 crore in the March quarter.The issues stemmed from internal trades involving low-liquidity instruments, such as 3 to 6-year yen and 8 to 10-year dollar borrowings. Rather than directly hedging foreign currency borrowings and deposits with external counterparties, the bank used its internal desk for the hedging process.