The renewed scrutiny by the Securities and Exchange Board of India (Sebi) comes after a forensic report by Grant Thornton allegedly found that these executives possessed and traded on price-sensitive information about severe accounting irregularities before it became public.
The forensic report is an outcome of an audit the bank’s board undertook at the instance of banking regulator Reserve Bank of India (RBI), after it found discrepancies in accounting for internal derivatives trades late last year. The report was submitted by Grant Thornton to the board on 26 April. However, Sebi has yet to get a copy, according to the first person cited earlier.
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“Sebi has sought IndusInd Bank’s forensic report to study the findings,” the first person cited above said on condition of anonymity. “However, in its first round of checks, Sebi had found that the two executives had made disclosures when they sold shares.”
This person added that the regulator re-initiated investigations after media reports suggested the forensic report has found that the executives were very much aware of the issues with derivatives accounting as evident from email trails.
“RBI is looking into it (IndusInd Bank accounting discrepancies),” Sebi chairman Tuhin Kanta Pandey told mediapersons on the sidelines of an Assocham event on Thursday. “Whatever Sebi has to do… whatever Sebi’s remit is, Sebi is doing.”
According to the people cited earlier, the Sebi investigation might even examine if the bank’s board was also aware of the issues highlighted in the forensic report.
“In the light of new evidence, if the board was aware of the disclosures of share dealings of its executives, we need to examine if it failed to make the requisite disclosures,” said the first person cited earlier.
Emailed queries to Sebi’s spokesperson remained unanswered till press time.
Also read: IndusInd Bank: CLSA, Investec downgrade stock as fresh accounting issues crop up
“We are talking of a listed entity and not an unlisted bank,” said Shriram Subramaniam, founder and managing director of proxy advisory firm InGovern Research. “Therefore, it is Sebi’s remit to examine if IndusInd’s board knew about the issues in derivatives accounting in July last year and their subsequent actions.”
In March, IndusInd Bank reported improper accounting in forex derivatives that blew a ₹1,960 crore hole in its books, triggering a crash in its stock price, and audits by PricewaterhouseCoopers (PwC) and Grant Thornton.
In April, the bank saw the exit of two of its top executives–Sumant Kathpalia, CEO, and Arun Khurana, deputy CEO. Mint reported earlier this month that Sebi had closed the insider trading probe after it found that these executives had made adequate disclosures before trading in shares.
However, a Reuters report on 8 May referring to the forensic audit said that these two executives traded in IndusInd Bank shares while they were aware of accounting lapses at the bank.
To be sure, the bank’s chief financial officer Gobind Jain had resigned earlier, a day before the announcement of its third quarter results.
On Wednesday, the bank’s chairman Sunil Mehta told analysts in an earnings call that the board suspects fraud by key employees in its accounting and reporting departments that led to the recent financial blow-ups at the private sector lender.
He also said that the board was not apprised of the multiple accounting lapses, even at the time of approving financial results. The suspicion of fraud comes after receiving investigation reports on accounting of internal derivative trade, Mehta said.
IndusInd Bank reported its biggest quarterly loss of ₹2,328 crore for the January-March 2025 period after it ramped up provisions and reversed income worth ₹2,500 crore linked to incorrect accounting of derivative trades and stress in the microfinance portfolio. Provisions and contingencies jumped 165% year-on-year to ₹2,522 crore in Q4FY25, compared to ₹950 crore in the same period a year ago.
On Thursday, the bank’s shares closed 1.8% higher than Wednesday at ₹785.10 on the BSE.
Rhik Kundu in Delhi contributed to this story.