More Trouble for IndusInd Bank Former CEO, Big Penalty may be imposed Over Insider Trading Violations
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IndusInd Bank is reportedly considering penalties against two of its former top executives – ex-Managing Director and CEO Sumant Kathpalia, and former Deputy CEO Arun Khurana. These two officials were in charge of key operations at the bank until recently.
Why Is the Bank Taking This Step?
According to people familiar with the situation, the bank’s board has been discussing the issue for some time and has held multiple meetings to review the matter. Legal advice has also been sought before moving forward.
The reason behind this move is linked to a forensic audit report prepared by Grant Thornton, a global accounting and advisory firm. The report found that both Kathpalia and Khurana were aware of an accounting issue related to currency derivatives. Additionally, the report suggests that they bought or sold shares of IndusInd Bank before this issue became public – which could be a violation of insider trading laws.
What Is the Issue About?
The core of the problem lies in how some internal currency derivative trades were accounted for. According to the forensic report, the bank had incorrectly booked profits from these trades, especially when the trades were ended earlier than scheduled. These were not real profits, just notional ones that were shown in the bank’s books. This resulted in an accounting discrepancy that had a cumulative negative impact of ₹1,959.98 crore on the bank’s profit and loss statement as of March 31, 2025.
The board of IndusInd Bank is now looking at the roles played by key individuals involved in this discrepancy. It is reviewing the trades conducted by the two former executives and deciding whether to impose penalties under the bank’s insider trading policy.
What Happens Next?
As per the bank’s policy, if there’s a suspected case of insider trading, the individuals involved must be given a chance to respond before any final action is taken. The board is currently in this process and will make a decision after hearing from the two former executives.
It’s worth noting that this isn’t the first time IndusInd Bank has taken action under its insider trading rules. In July last year, it fined an independent director, Bhavna Doshi, ₹5 lakh for accidentally trading 667 shares of the bank during a blackout period when trading was not allowed.
If the bank decides to penalize Kathpalia and Khurana, this could also attract the attention of SEBI (Securities and Exchange Board of India), the market regulator. Under SEBI rules, all listed companies must follow strict insider trading policies, especially when it comes to people in senior roles who have access to confidential information that could affect the company’s share price.
What Has the Bank Said So Far?
In response to a clarification sought by stock exchanges, IndusInd Bank issued a statement on May 9, 2025. The bank confirmed that it had received the Grant Thornton report on April 26 and that the report had raised concerns from an insider trading perspective. The bank said it is still reviewing the findings and will take action according to the law and its internal policies.
Earlier this year, on March 10, IndusInd Bank publicly acknowledged the discrepancy in its financials. By March 20, it had appointed Grant Thornton to conduct a detailed forensic audit. The audit report was submitted on April 26, revealing the full extent of the accounting errors and highlighting flaws in how some internal trades were handled.
Resignations Following the Audit
Soon after the findings, both senior officials resigned from the bank. Arun Khurana stepped down on April 28 and described the situation as “unfortunate” in his resignation letter. He was responsible for overseeing the bank’s Treasury operations, which played a key role in the accounting issue.
The very next day, on April 29, Sumant Kathpalia, the Managing Director and CEO, also resigned from his position.
What’s Next for IndusInd Bank?
The board is currently reviewing responsibilities within its senior management and may restructure roles to prevent such issues in the future. The focus is on accountability, and the bank is committed to taking the necessary steps to restore trust and ensure better compliance going forward.
