The Securities and Exchange Board of India (SEBI) has revived its investigation into two former top executives of IndusInd Bank—ex-CEO Sumant Kathpalia and his deputy Arun Khurana—following new allegations that they engaged in insider trading using price-sensitive information. This marks a significant reversal, as SEBI had earlier closed the probe after clearing both executives of wrongdoing.
According to a report, SEBI’s earlier investigation concluded earlier this month, reportedly stating that both individuals had followed due process and made requisite disclosures before trading company shares. However, the emergence of media reports—particularly a story referencing a forensic audit by Grant Thornton—suggested the two may have acted on undisclosed information about significant accounting irregularities before they became public knowledge.
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Forensic Audit Unveils Unsettling Findings
The fresh evidence stems from a forensic audit conducted by Grant Thornton, commissioned by IndusInd Bank’s board under directions from the Reserve Bank of India (RBI). The audit was prompted by revelations in March 2025 that the bank had improperly accounted for foreign exchange derivatives, resulting in a staggering ₹1,960 crore shortfall.
The audit report, submitted to the bank’s board on April 26, reportedly reveals that both Kathpalia and Khurana conducted share transactions while allegedly being aware of these financial discrepancies. While the report has not yet been submitted to SEBI, the regulator has formally requested access to it.
According to sources, SEBI is particularly concerned with whether the trades made by the two executives violated insider trading norms and whether the board failed to act upon early red flags raised during internal reviews and audits.
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Alleged Fraud and Governance Questions
The situation escalated after IndusInd Bank Chairman Sunil Mehta, during a call with analysts, suggested that the financial misstatements might stem from fraudulent activities carried out by senior accounting and reporting staff. Mehta also admitted that the board was not informed about these discrepancies—even during approval of financial statements—raising serious questions about internal governance and oversight.
SEBI Chairman Tuhin Kanta Pandey confirmed that both SEBI and the RBI are now actively investigating the case under their respective jurisdictions. While SEBI’s focus is on possible market manipulation and insider trading violations, the RBI is believed to be examining broader compliance failures within the bank’s risk and audit functions.
Adding another layer to the unfolding controversy, SEBI may now also probe whether IndusInd Bank’s board failed in its duty to disclose potentially damaging information—particularly share dealings by top executives and the findings of the forensic report—to shareholders and regulators in a timely manner.