A forensic investigation conducted by global audit and advisory firm Grant Thornton has uncovered troubling findings against two top former executives of IndusInd Bank, suggesting they traded in the company’s shares while aware of significant accounting lapses that had not yet been publicly disclosed.
According to a confidential summary, the former CEO Sumant Kathpalia and Deputy CEO Arun Khurana engaged in trading activity in IndusInd Bank’s stock between March 2024 and March 10, 2025—a period when they had internal knowledge of accounting irregularities stemming from incorrect treatment of internal derivative transactions. This misconduct has since caused a ₹1,900 crore ($230 million) hole in the bank’s financials, prompting regulatory concern and a broader probe into potential insider trading.
Timeline of Trades and Resignations Raises Red Flags
The document reviewed by Reuters highlights that both Kathpalia and Khurana bought and sold substantial volumes of the bank’s shares before the disclosure of the lapses. Data from the National Stock Exchange of India shows:
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Kathpalia sold shares worth ₹283.48 million and bought ₹102.71 million worth during the period in question.
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Khurana sold shares amounting to ₹320.72 million.
These trades took place before IndusInd Bank’s March 10, 2025 filing, which disclosed that an internal review had uncovered years of accounting errors tied to internal derivatives that were non-compliant with Reserve Bank of India (RBI) regulations.
While both executives resigned in April, Kathpalia cited “moral responsibility,” and Khurana described the situation as “unfortunate,” neither directly acknowledged nor denied wrongdoing. Requests for comment from the two, as well as Grant Thornton, SEBI, and IndusInd Bank, went unanswered.
Insider Knowledge, Suppression Allegations, and Regulatory Oversight
The forensic review not only flagged the suspicious trading activity but also revealed that multiple finance and treasury executives were aware of the accounting discrepancies, some as early as May 2015, when the Market Risk team internally raised concerns.
Grant Thornton’s findings further indicated that:
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Emails suggested deletion of communications related to the discrepancies.
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Some individuals allegedly suppressed critical financial information to avoid internal escalation.
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The lapses were enabled by manual accounting systems, poor documentation, and weak internal controls.
Despite the gravity of the situation, the summary did not offer conclusive statements about the legality of the trades but emphasized the need for regulatory evaluation under insider trading frameworks.
Impact and RBI’s Response
IndusInd Bank’s share price dropped sharply following the March disclosure but stabilized after the RBI reassured investors about the bank’s capital adequacy and operational stability. The central bank has since approved the formation of an interim executive committee to oversee day-to-day functions while a permanent CEO is selected.
In its April 27 regulatory filing, IndusInd acknowledged that the findings of an independent professional firm (Grant Thornton) confirmed incorrect accounting and stated that it was “taking necessary steps to fix accountability.” The unfolding scandal raises significant concerns about corporate governance, regulatory oversight, and the broader role of top executives in ensuring financial transparency. Market watchers expect the Securities and Exchange Board of India (SEBI) to initiate a formal probe into the alleged insider trading and audit trail suppression.
The case also shines a spotlight on systemic gaps in India’s banking compliance framework, where lapses may go unnoticed for years until internal reviews or external audits uncover hidden risks. The outcome of the probe could have far-reaching implications not just for IndusInd Bank, but for the integrity of India’s entire financial ecosystem.