The Ministry of Corporate Affairs (MCA) is expected to expand its probe into IndusInd Bank after initial findings pointed to possible corporate governance breaches. The matter may be escalated to the Directorate General of Investigations or handed over to the Serious Fraud Investigation Office (SFIO), potentially setting the stage for criminal action.
Although the bank has not yet received a formal notice, this development adds further pressure to the private sector lender, already under scrutiny from multiple regulatory bodies following two rounds of accounting discrepancies this year.
₹2,653 Crore Discrepancies Across Derivatives and Microfinance Books
The issue first came to light in March 2025, when IndusInd Bank disclosed accounting errors in its internal foreign exchange derivative contracts, resulting in a downward revision of its net worth by ₹1,979 crore. The announcement triggered a nearly 27% intraday fall in the bank’s stock price, prompting the Reserve Bank of India (RBI) to publicly reassure markets of the bank’s solvency. However, the central bank also cited “serious weaknesses in governance.”
In May 2025, the bank revealed another ₹674 crore irregularity, this time linked to its microfinance operations. The bank admitted to misclassifying ₹595 crore under “other assets” and ₹79 crore as interest income. Both figures were unsupported by documentation and subsequently reversed in the fourth quarter of FY25.
Multiple Agencies Investigating Leadership and Auditor Failures
The Securities and Exchange Board of India (SEBI) has launched a probe into possible insider trading by former CEO Sumant Kathpalia and Deputy CEO Arun Khurana, who allegedly sold shares before the accounting lapses became public. A forensic audit by Grant Thornton reportedly flagged these transactions, and both executives have been temporarily barred from accessing the capital markets.
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The RBI continues to oversee the bank’s internal restructuring and has expressed concern over control failures. Separately, the Institute of Chartered Accountants of India (ICAI) is evaluating the role of statutory auditors, with possible disciplinary action under consideration.
MCA’s preliminary findings indicate three major lapses: the board’s failure to identify financial misstatements, incorrect recording of transactions, and possible concealment of material facts from investors and regulators. These issues raise concerns about compliance with the Companies Act and may lead to broader enforcement action.