In a major development, IndusInd Bank is reportedly considering penal action against its former MD & CEO Sumant Kathpalia and Deputy CEO Arun Khurana for violating insider trading rules, according to sources close to the matter. The board has been actively deliberating on the issue over the past few weeks and has even sought legal counsel before reaching a final decision.
If the board indeed imposes penalties for the insider trading violations, the matter could escalate further, with SEBI (Securities and Exchange Board of India) potentially initiating its own action against the two former executives.
Forensic Audit Reveals Major Accounting Discrepancy
The issue came to light earlier this year when IndusInd Bank disclosed a significant discrepancy in its financial records. On March 10, the bank admitted to inconsistencies and by March 20, it had appointed Grant Thornton as a forensic auditor to dig deeper into the matter.
The final forensic audit report, submitted on April 26, 2025, revealed a cumulative adverse accounting impact of ₹1,959.98 crore on the bank’s profit and loss statement as of March 31, 2025. The report pointed to incorrect accounting of internal derivative trades, particularly in cases of early termination, as the core reason behind the accounting discrepancies.
“These trades were wrongly recorded as notional profits,” the report stated, which created a misleading financial position for the bank.
Insider Trading Angle and Potential Penalty
The insider trading angle emerged after the audit report raised concerns that required examination under the bank’s Insider Trading Code. In a statement issued on May 9, IndusInd Bank clarified:
“The Grant Thornton report has identified certain aspects that may require a determination from an insider trading perspective. The Bank is examining these findings and will take necessary steps under applicable law.”
The board is now working on fixing accountability, including the possibility of realigning the roles and responsibilities of senior management.
Resignations Follow Audit Findings
In the wake of these revelations, Deputy CEO Arun Khurana resigned on April 28, calling the events that led to the discrepancy “unfortunate” in his resignation letter. Notably, Khurana was responsible for the Treasury function, which was at the heart of the misreported trades.
A day later, Sumant Kathpalia, the then MD & CEO of IndusInd Bank, also resigned, deepening the crisis and bringing the leadership vacuum into sharp focus.
What Lies Ahead for IndusInd Bank
This unfolding situation has raised serious questions about governance, internal controls, and financial transparency at IndusInd Bank. The insider trading allegations could have wider ramifications if SEBI steps in to conduct its own investigation.
The board’s actions in the coming weeks will be crucial—both to restore investor confidence and ensure strict accountability within the bank’s management.
As the investigation continues, stakeholders and market observers will be closely watching how IndusInd Bank handles the fallout from this controversy and what regulatory measures might follow.