Looking into possible 'egregious violation' at IndusInd Bank: Sebi chief

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Thursday indicated at the market regulator’s scrutiny of IndusInd Bank, stating that Sebi was looking if there were any “egregious violations” by anyone.

 

His comments come at a time when the private-sector lender is under the scanner over alleged derivatives accounting lapses and allegations of insider trading by officials who might have sold shares while being aware of the alleged lapses.

 

“The RBI is looking into that (IndusInd matter). Whatever Sebi has to do in relation to whatever Sebi’s remit is, Sebi is doing,” Pandey told the media on the sidelines of a capital market event by industry body Assocham in Delhi.

 

“If there are any egregious violations by anyone, Sebi is looking into that,” the Sebi chief said.

 

A day earlier, during an analyst call after Q4 earnings, the bank disclosed 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”.

 

The bank said 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. The management also said it had “taken a very serious view with respect to staff accountability across levels to reinforce the governance and compliance culture”.

 

In April, the bank’s managing director (MD) and chief executive officer (CEO) Sumant Kathpalia and deputy CEO Arun Khurana had resigned following discrepancies in the bank’s derivatives portfolio and accounting.

 

The probes into insider trading stem from the possibility that IndusInd Bank executives possessed unpublished price-sensitive information while selling shares in the open market. The regulator had also requested details of trades executed by these executives, the sources had shared.

 

Stock-exchange disclosures show that between May 2023 and June 2024, Kathpalia offloaded nearly 950,000 shares, worth around ₹134 crore, while Khurana sold 550,000 shares, valued at ₹82 crore. These shares were acquired through the bank’s employee stock ownership plan. Sources, however, had said the executives might have obtained pre-clearance from the compliance team for these sales.

 

Shares of IndusInd Bank ended at ₹783.5 apiece on Thursday, gaining 1.7 per cent, on the National Stock Exchange.

 

IndusInd Bank reported a net loss of ₹2,329 crore in the quarter ended March, its worst ever quarterly loss, due to higher provisions and reversal of incorrectly booked revenue and entries worth over ₹2,500 crore linked to accounting discrepancies in the derivatives and microfinance segments.