IndusInd Bank has faced a Rs. 1,960 crore loss on its derivatives portfolio, a management shake-up, and an ongoing investigation into its microfinance business since early March. A new report suggests it all began with a whistleblower letter sent to the bank’s board of directors and the Reserve Bank of India (RBI). It has been learnt that the letter was sent to the bank’s senior management just days before CEO Sumant Kathpalia received a one-year extension from the RBI on March 6—far shorter than the board’s recommended three-year term. Just days later, on March 10, the private lender disclosed accounting lapses in its derivatives portfolio, triggering a 27% drop in its stock price.

While the derivatives issue was still under review by two external auditors, reports surfaced that the bank had hired an audit firm to investigate a Rs. 600 crore discrepancy in interest income recognition in its microfinance portfolio. In an exchange filing, the bank later clarified that the firm was supporting its internal audit team in this matter.

The issues in the derivatives portfolio were examined by PwC and Grant Thornton Bharat. On April 26, the bank announced that the total adverse accounting impact on its earnings would be Rs. 1,960 crore as of March 31, 2025. Grant Thornton raised allegations of insider trading against CEO Sumant Kathpalia and Deputy CEO Arun Khurana. Both have since resigned from the company. The bank is now overseen by a two-person, board-appointed committee. The board of IndusInd Bank is also considering imposing penalties on both officials. The board has studied the trades carried out by Kathpalia and Khurana and is evaluating the possibility of imposing penalties on the two bankers. As per the bank’s insider trading policy, it will have to give time to the two bankers to respond to the allegations, before making a final view and imposing a penalty. If the bank’s board imposes a penalty for violation of its insider trading policy, then SEBI may also proceed against the two bankers. As per SEBI regulations, listed companies are required to have their own insider trading policy in line with SEBI’s Insider Trading regulations, applicable for designated persons. In simple terms, designated persons are key people of the company who have non-public price sensitive information in their possession.

IndusInd Bank’s internal audit department is currently examining a series of past accounting reversals that were first raised in the whistle blower letter.
 

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