The Securities and Exchange Board of India (SEBI) has imposed a ban on five senior former officials of IndusInd Bank, including ex-CEO Sumant Kathpalia, for engaging in insider trading and violating key provisions of securities law. The officials allegedly misused confidential financial data prior to public disclosure and benefited from illegal trades worth nearly ₹20 crore.
The Allegations: Insider Trading Rooted in Leadership
SEBI named former Managing Director & CEO Sumant Kathpalia, along with four other high-ranking officers — Deputy CEO Arun Khurana, Treasury Head Sushant Saurav, Head of GPMC Rohan Jadna, and Chief Administrative Officer Anit Makol Rab — as key individuals involved in an insider trading scheme.
According to SEBI’s findings, these officials had access to unpublished price-sensitive information (UPSI) related to IndusInd Bank’s quarterly financial performance. Instead of maintaining confidentiality, the executives allegedly engaged in share trades just before the financials were made public — a clear breach of insider trading laws under SEBI’s (Prohibition of Insider Trading) Regulations, 2015.
The regulator also proposed the disgorgement of ₹19.78 crore, the collective unlawful gains allegedly made by the officials during the scheme.
Method of Violation: Trades, Timing, and Cover-Up
SEBI’s order details how the accused executed trades by leveraging sensitive earnings data before public disclosure, which influenced stock pricing. This included pre-emptive selling and buying of shares to maximize returns based on knowledge not available to general investors.
The internal audit team of IndusInd Bank had earlier flagged discrepancies after RBI guidelines were allegedly misused during the earnings cycle. The trades were not only unethical but also in violation of directives issued by the Reserve Bank of India regarding fair conduct in financial disclosures.
In one internal communication, a compliance team member advised that no securities should be traded until further notice — a warning that, according to SEBI, was disregarded.
Wider Implications: SEBI Deepens Probe Amid Banking Sector Scrutiny
The case comes amid heightened scrutiny of the banking and financial services sector in India. SEBI Chairperson Madhabi Puri Buch had recently emphasized stronger oversight and enforcement around insider trading — especially where systemic players like banks are involved.
This is not an isolated investigation. SEBI is also probing allegations that IndusInd’s top brass may have been involved in a separate ₹3,400 crore audit-related fraud, further compounding regulatory concerns. The outcome of these probes could set new precedents in enforcement against large private banks.
The RBI, too, has been alerted. While the SEBI probe focused on securities violations, sources confirm that RBI is reviewing governance lapses and could impose its own penalties or restrictions.