Delayed disclosures of accounting lapses by IndusInd Bank catch Sebi eye

The Securities and Exchange Board of India (Sebi) is probing whether there were delays in disclosures of discrepancies in derivatives accounting and lapses by IndusInd Bank and its then management, according to people aware of the development. 

While the capital markets regulator is investigating alleged insider-trading violations, it is also reviewing documents and data for any possible violations of the Sebi (Listing Obligations and Disclosure Requirements) Regulations (LODR). The market regulator recently sought the forensic report from the bank, which it is analysing along with emails and other data to probe any violations, said sources. 

“Along with possible Sebi (Prohibition of Insider Trading) Regulations violations, the regulator is verifying if the disclosures under LODR on these discrepancies were required much earlier, as the officials may have been aware of these lapses,” said a person privy to the information. 

In the alleged insider trading matter, the market regulator is looking into whether the officials traded their shares while being aware of the lapses. 

While an earlier probe into the trades done by the then managing director (MD) and chief executive officer (CEO) and deputy CEO showed that the trades were disclosed, it is now to be verified if the trades were done while having access to unpublished price-sensitive information. Stock exchange disclosures show that between May 2023 and June 2024, IndusInd’s then MD and CEO Sumant Kathpalia offloaded nearly 950,000 shares, worth around ₹134 crore, while deputy CEO Arun Khurana sold 550,000 shares, valued at ₹82 crore. These shares were acquired through the bank’s employee stock ownership plan. 

Emailed queries sent to Sebi and IndusInd remained unanswered till the time of going to press. 

Last week, speaking on the sidelines of an event in Delhi, Sebi Chairman Tuhin Kanta Pandey observed that while the Reserve Bank of India was looking into the matter, the market regulator was checking if there were any ‘egregious violations’ by anyone. 

On March 10, the private-sector bank disclosed a review by an external agency of discrepancies in its account balances relating to its derivatives portfolio. The bank said its detailed internal review had estimated an adverse impact of roughly 2.35 per cent of its net worth as of December 2024. 

On Wednesday, IndusInd reported a net loss of ₹2,329 crore in Q4FY25, its worst quarterly loss ever, as it substantially ramped up provisions and reversed incorrectly booked revenue and income entries worth over ₹2,500 crore linked to accounting discrepancies in the derivatives and microfinance segments discovered during the quarter. The bank said that its board suspected a “fraud may have been committed against the bank involving certain employees having a significant role in accounting and financial reporting”. 

IndusInd added that it had taken necessary steps, including reporting to regulatory and investigative authorities. 

On the derivatives accounting issue, the bank said it was in the process of taking measures to improve internal controls and processes to prevent future lapses. 

Under the lens

  *  The regulator is looking into possible violations of listing obligation and disclosure requirements regulations

  *  It recently sought a forensic report from the bank for scrutiny along with emails and other data to probe violations

  *  On allegations of insider-trading, Sebi is checking if officials traded in shares while being aware of undisclosed lapses