PwC Uncovers ₹1,979 Crore Hidden Derivative Losses at IndusInd Bank, Governance Concerns Deepen

Grant Thornton names 25 employees; SEBI freezes ₹19.78 crore from ex-CEO and four executives for insider trading

On April 15, 2025, IndusInd Bank disclosed that PricewaterhouseCoopers (PwC), appointed by its board in October 2024 to independently validate an internal review, identified discrepancies in the bank’s derivatives portfolio and estimated a negative impact of ₹1,979 crore as of June 30, 2024. The mechanism was straightforward and deliberate: treasury gains were booked into profit and loss statements, but the corresponding derivative losses were not routed through net interest income, creating a receivable pool of ₹2,201.76 crore as of March 31, 2024, that overstated both profits and assets across multiple financial years. After adjusting for ₹384.18 crore of swap-cost amortisation recorded by the ALM Desk, the entries resulted in a net overstatement of profit and assets of ₹1,817.58 crore.

What PwC Actually Found — In Plain Terms

Treasury desk used manual accounting entries to offset trading losses instead of booking them through NII

The core structural failure: PwC found no direct linkage between the ALM Desk (which manages balance-sheet risks) and the Trading Desk (which executes market transactions), the treasury back office exploited this gap to post manual entries

PwC flagged: the bank cannot clearly establish whether on-balance sheet assets and liabilities are hedged externally at bank level, meaning the entire hedging structure was unverifiable

A receivable pool of ₹2,201.76 crore was created, inflating both the profit and asset columns on the balance sheet

Losses had accumulated due to accounting discrepancies where forex swap transactions were executed between 2017 and 2024

PwC’s scope was limited to the accounting review only; it did not investigate fraud or individual accountability

The post-tax impact on the bank’s net worth was pegged at 2.27% as of December 2024, marginally better than the bank’s own internal estimate of 2.35%

The 71-page PwC report examined more than 1 million trades across 7 product categories, including 3,31,387 internal transactions, and reviewed the Calypso–Finacle interface between April 1, 2023 and June 30, 2024

The Full Damage Map

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Grant Thornton Goes Deeper — 25 Names, One Root Cause

Grant Thornton was appointed by IndusInd’s board to find the root cause behind the discrepancy in the derivatives portfolio and submitted its report on April 26, 2025.

Its findings were direct: incorrect accounting of internal derivative trades, particularly in cases of early termination, led to notional profits, which resulted in accounting discrepancies.

The forensic audit identified 25 employees of IndusInd Bank in connection with the accounting lapses, including individuals from the treasury department, former MD and CEO Sumant Kathpalia, and Deputy CEO Arun Khurana, who was also the head of global trade.

PwC’s review itself examined the Calypso–Finacle interface, including configuration, monitoring and reconciliation processes, GT then investigated whether entries were being made outside Calypso entirely, in separate Excel files.

What stood out: reports indicate that some senior treasury staff had raised concerns internally before the audit, and communication trails reportedly show that management had been made aware of the accounting treatment and its possible financial impact.

The SEBI Insider Trading Order — The Sharpest Blow

This is where it stops being an accounting story.

SEBI’s probe revealed that by December 2023, internal emails were already circulating estimates of the discrepancy at ₹1,572 crore, ₹1,776.49 crore, and ₹2,361.69 crore for periods ending September 2023, December 2023, and March 2024, respectively. The bank did not inform stock exchanges until March 10, 2025.

In an interim ex-parte order on May 28, 2025, SEBI barred former CEO Sumant Kathpalia and four other senior officials from trading in the securities market for allegedly selling shares while in possession of unpublished price-sensitive information.

The five executives named and their disgorgement amounts:

The five officials sold a combined total of over 4.78 lakh shares between December 2023 and March 2025, the period during which they held information about significant losses. IndusInd Bank’s stock fell 27.16% the day after the public disclosure on March 10, 2025.

The MFI Problem — A Second Front Nobody Is Watching

The derivatives scandal overshadowed a parallel rot in the microfinance book.

An internal audit found ₹674 crore had been incorrectly recorded as interest income over three quarters of FY25 in the microfinance portfolio, fully reversed as of January 10, 2025

A separate finding flagged unsubstantiated balances of ₹595 crore under “other assets,” subsequently set off against corresponding “other liabilities” in January 2025

The board then disclosed suspected fraud, ₹172.6 crore wrongly booked as fee income in the microfinance segment over three quarters ending December 2024

Brokerages have warned of structural impairment to the bank’s core profitability and revised FY25 and FY26 estimates downward following these additional disclosures

Regulatory Pile-Up — Every Major Regulator Is Now In

Who Was the Statutory Auditor, And What Happens Next

ICAI President Charanjot Singh Nanda confirmed the decision to review IndusInd Bank’s books, noting the lapses, totalling ₹2,600 crore, go back seven to eight years. The review covers FY24 and FY25 audit sign-offs. Auditor liability is now a live question. The joint statutory auditors for the review period, MSKA & Associates and MP Chitale & Co, had held off signing the FY25 financials pending GT’s validation of PwC’s findings. SFIO has since summoned both firms, along with S R Batliboi (EY) and Haribhakti & Co, questioning audit oversight going back a decade.

Stock and Valuation Damage

IndusInd shares lost approximately 23.4% in the two weeks after the March 10 disclosure alone

The stock remained down over 53% in the six months following the initial disclosure

After PwC quantified the discrepancy in April, shares briefly rebounded 5.80% to ₹778.50 on value buying

IndusInd is India’s fifth-largest private lender with a balance sheet of $63 billion, making this the largest accounting scandal at a listed Indian private bank in recent memory

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FAQ

Who exactly executed the manual accounting entries at IndusInd Bank?

Grant Thornton’s forensic report identified 25 employees, mostly from the treasury team, including the Treasury Head and several senior officials at various levels. Former CEO Sumant Kathpalia and Deputy CEO Arun Khurana were also named in the list. The board has initiated accountability proceedings. Around half of the identified employees may be retained in other departments depending on their level of involvement.

When did senior management first know about the losses?

SEBI’s order establishes that internal emails dated December 16, 2023, March 6, 2024, and May 5, 2024, circulated estimates of discrepancies at ₹1,572 crore, ₹1,776.49 crore, and ₹2,361.69 crore respectively, more than 15 months before public disclosure on March 10, 2025.

Is IndusInd Bank safe for depositors and investors right now?

The RBI has stated IndusInd is well-capitalised. The bank has reversed all incorrectly booked income entries and reflected the full impact in its FY25 financial statements. However, brokerages have warned of structural impairment to core profitability and business growth, with FY26 estimates revised downward. The bank is also without a permanent CEO, its board is racing to submit CEO candidates to the RBI before a June 30 deadline following the resignation of top executives.