Mumbai: The Serious Fraud Investigation Office has asked major audit firms associated with IndusInd Bank over the past decade to join its ongoing probe into alleged irregularities in the bank’s derivatives portfolio, widening an investigation that has already drawn in former senior executives and key internal functionaries.
The firms named in connection with the questioning are S R Batliboi & Co, an EY network firm, Haribhakti & Co, M P Chitale & Co, and MSKA & Associates, a BDO network firm. The ministry’s investigation arm is examining corporate governance issues and accounting discrepancies at the bank, and whether these amount to fraud under Section 447 of the Companies Act.
Probe Expands to Audit Oversight
The SFIO probe was ordered earlier this year by the Ministry of Corporate Affairs, which cited public interest and serious accounting discrepancies flagged by statutory auditors and forensic reports. The investigation has since widened to include the role of multiple audit firms associated with the bank over the past decade.
The questioning is aimed at establishing whether there were lapses in oversight or reporting, particularly in relation to the derivatives portfolio. The agency has been issuing summons to individuals directly, without routing them through the bank.
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Accounting Lapses and ₹2,000 Crore Impact
The case traces back to March 2025, when IndusInd Bank disclosed discrepancies in derivatives transactions spanning five to seven years. After multiple audits, the bank recognised nearly ₹2,000 crore in one-time losses in its March 2025 quarter results.
The accounting lapses led to the resignation of Kathpalia and deputy CEO Arun Khurana in April 2025. The derivatives-related irregularities are estimated to have resulted in losses of about ₹2,000 crore, with Sumant Kathpalia serving as the bank’s CEO when the mis-accounting allegations surfaced in March 2025.
On December 18, 2025, the bank disclosed that issues related to the accounting of internal derivative trades, certain unsubstantiated balances under other assets and other liabilities, and microfinance interest and fee income had been reported to the SFIO under the Ministry of Corporate Affairs on June 2, 2025. Six days later, on December 24, the bank said it had received a letter dated December 23 from the SFIO formally initiating an investigation under Section 212 of the Companies Act, 2013. The bank also said it had not received any recent communication from the SFIO directly.
Documents Under Review and Timeline for Questioning
The agency is examining observations and findings recorded in ADT-4 forms, forensic monitoring reports, forensic audit reports, internal audit reports, inspection audit reports, and findings of other agencies under the Companies Act. Form ADT-4 is a statutory report filed by auditors with the central government to flag suspected fraud of at least ₹1 crore committed by company executives or employees.
The probe will also examine alleged manipulation of books of account, the creation of fictitious accounts, misclassification of assets, and the overall impact on the bank’s financials. The summons to the audit firms follow the questioning of former CEO Romesh Sobti and former treasury head Siddharth Banerjee in connection with the same matter. Kathpalia, Khurana, and former CFO Gobind Jain have also been called in for questioning over the alleged irregularities.
The questioning process is likely to conclude by April 27. None of the four firms responded to requests for comment.
