IndusInd Bank reveals ₹173 cr fraud in microfinance during intern audit

IndusInd Bank uncovers suspected internal fraud involving about ₹173 crore in microfinance; board initiates legal steps and adjusts FY25 accounts to reflect discrepancies

The board of IndusInd Bank on Wednesday said it suspects fraud in its ranks, following findings from internal audits and an investigation by an independent professional firm.

 

In a regulatory filing, the bank stated that certain employees, who played key roles in its financial reporting and accounting functions, may have been involved. The bank found that ₹173 crore had been incorrectly recorded in its microfinance portfolio.

 

So far, discrepancies in the bank’s derivatives portfolio are estimated to impact its FY25 balance sheet by nearly ₹1,960 crore.

 

Additionally, internal audits conducted last week found two more discrepancies in interest income: one was worth ₹674 crore related to the microfinance portfolio while the other was worth ₹595 crore in other assets and liabilities. 

 

The internal audit team, in a report dated May 20, also found that over three quarters ending December 2024, a total of ₹172.6 crore had been wrongly booked as fee income in the microfinance segment. This amount was reversed in the March quarter.

 

In response, the board has instructed the bank to take all necessary legal steps. This includes informing regulatory bodies and investigative agencies, as well as holding those found responsible for the lapses accountable.

 

The lender confirmed that it has factored in all the identified discrepancies while preparing its financial results for the quarter and full year ending March 31, 2025.

 

Earlier this week, media reports claimed that market regulator Securities and Exchange Board of India (Sebi) is probing at least six employees of the bank in connection with insider trading, and that there were chances of employees being aware about the financial irregularities before they were made public.

 

Earlier this year, the bank's managing director and chief executive officer (CEO), Sumant Kathpalia, had resigned over the accounting lapses. His exit came a day after the deputy CEO Arun Khurana had also quit. In his resignation letter, Kapthpalia had said: "I wish to submit my resignation from the services of the bank in relation to the ongoing derivatives discussion. I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice."

 

In March this year, the Reserve Bank of India (RBI) had granted only a one-year extension to Kathpalia despite the bank’s Board had requesting a three-year reappointment.