IndusInd Bank Faces Government Probe Over INR 2,000 Crore Accounting Irregularities

Following an initial investigation by the Mumbai Police's Economic Offences Wing (EOW), the Ministry of Corporate Affairs' Serious Fraud Investigation Office (SFIO) has begun a comprehensive investigation into suspected accounting errors totalling more than INR 2,000 crore at IndusInd Bank. Sources claim that the probe was mandated by the SFIO in accordance with Section 212 of the Companies Act. The investigation will concentrate on allegations of profit overstatement at the bank and purported anomalies in derivatives accounting. The roles of key officials, including former CEO Sumant Kathpalia and former Deputy CEO Arun Khurana, are being scrutinised.

Investigators Putting Scanner on Every Minute Details

About a dozen current and former employees, including members of the former top management, had previously given testimonies to the EOW. Investigators said they have asked the Reserve Bank of India (RBI) for clarification on banking regulations and policies, especially those pertaining to foreign exchange hedging operations, and that they are looking into every avenue. An extra entry of roughly INR 250 crore is also being investigated in addition to the INR 1,900–2,000 crore accounting error.

Investigators were informed by employees whose remarks were recorded that foreign exchange hedging was a common banking practice. The RBI's opinion on whether such methods were acceptable under current standards is currently being sought by the EOW.

According to sources, bank executives also asserted that, as of 2023, provisions were made whenever accounts displayed fund deficits. Investigators observed that Arun Khurana, the then-Deputy CEO, oversaw the establishment of the trading desk and had firsthand knowledge of its operations.

What Exactly Happened?

A claim of wrongdoing by the bank's previous leadership has been levelled by the current administration of IndusInd Bank. After the bank's share price and market capitalisation dropped after the lapses were revealed, investigators are looking into whether the loss was fraudulent. Police are also looking into claims that the accounting changes, which reportedly raised the stock price, provided financial benefits to the former senior management.

Whether insider trading resulted in profits totalling hundreds of crores is being investigated by investigators. CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned in April 2025 as a result of accounting problems that were initially discovered in the bank's derivatives portfolio and then in its microfinance division. Several employees' comments have been recorded by the EOW, which has also conducted two examinations of Kathpalia, Khurana, and former CFO Gobind Jain.

The three could be called back if necessary, according to officials. Jain has previously claimed treasury-related anomalies totalling more than INR 2,000 crore over the course of about ten years. He stated that significant shortcomings had been taking place in the bank's treasury operations for years in a letter dated August 26 to the Prime Minister's Office.