SEBI Probes IndusInd Bank Execs Over 'Egregious Violations'

On 23 May, the Securities and Exchange Board of India (Sebi) declared that it is looking into possible infractions by senior management of IndusInd Bank, which is accused of accounting crimes worth an estimated INR 3,400 crore.

 Sebi is especially looking into the suspected securities market infractions by bank staff, although the Reserve Bank of India (RBI) will conduct the main probe.

The Reserve Bank of India is investigating whatever Sebi needs to do in connection with... whatever Sebi's mandate is... Sebi is doing... According to a report by a media agency, Sebi Chairman Tuhin Kanta Pandey told reporters at an Assocham industry event, "Sebi is looking into any egregious violations by anyone in their capacity."

The board of IndusInd Bank confirmed on 22 May that some employees may have been involved in the scam and directed management to alert regulatory and investigation bodies.

Fraudulent Activities Observed in Various Banking Operations

The private sector bank is under investigation for engaging in fraudulent practices related to balance sheet disclosures, microfinance portfolios, and derivatives. The bank has started a forensic inquiry and an internal audit examination in response to high-level resignations.

Senior bank executives, including former Key Management Personnel, had circumvented important internal controls, according to internal audit findings. The central government has been informed by the bank that high management was probably involved in the accounting fraud.

The financial results for the quarter and year ended March 31, 2025, have been updated to reflect all found errors, according to IndusInd Bank. Incorrect recognition of derivative trades cost INR 1,960 crore, interest income was reversed by INR 674 crore, microfinance fraud cost INR 172 crore, manual entry errors cost INR 595 crore, and slippages climbed by INR 3,400 crore during the March quarter.

Due to accounting problems in the areas of derivatives, microfinance, and assets/liabilities, the bank had its worst performance in the March quarter of FY25, with a net loss of INR 2,329 crore. The first financial report since the accounting errors were reported was this one.

 However, IndusInd Bank shares rebounded Thursday, closing 1.82% higher at INR 785.10 on the BSE after initially declining 5.89% to INR 725.65, despite the company's bad quarterly reports. Another aspect concerning the bank is that, as a result of the index rejig, defence PSU Bharat Electronics Limited (BEL) would take IndusInd Bank's spot in the BSE Sensex.

The Turmoil will Hamper Bank Performance

According to financial analysts, IndusInd firm may see muted performance in the near future. The new MD and CEO will have a difficult time reconstructing the firm and winning back investor trust.

The bank's Board formed an Executive Committee for temporary operational management after CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned on April 29. The Board has until June 30 to submit new MD candidates to the RBI, according to a number of media publications.