On 21 May, IndusInd Bank chairman Sunil Mehta said the board was not informed of the derivatives discrepancies, and that it took swift measures when it came to know. However, an investigation by the Securities and Exchange Board of India (Sebi) found that though the bank disclosed the matter to exchanges on 10 March, 2025, the board had hired KPMG as early as 29 January, 2024 to review the discrepancies revealed by an internal team.
The day after the bank disclosed the discrepancies, its shares crashed 27%.
According to Sebi, IndusInd Bank formed the internal team in September 2023, after a central bank diktat on banks’ investment portfolios in the same month. The bank then asked KPMG to validate its findings. Sebi said KPMG gave a figure of ₹2,093 crore to the bank, suggesting the negative impact due to discrepancies, till 31 December 2023, in an email on 21 February 2024.
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Emails sent to the Reserve Bank of India, Sebi, IndusInd Bank and Mehta remained unanswered.
Governance framework
Experts said the order raised important questions about the internal governance and disclosure framework at IndusInd, as well as the role of the board.
“The board has completely lost the trust of investors,” said Shriram Subramanian, the managing director of proxy advisory firm InGovern.
“They did not act promptly, even though they appointed KPMG to look into the discrepancies. It is surprising that the board waited for over a year to make an announcement,” said Subramanian.
Mint earlier reported that RBI had asked the bank to sort out problems identified by the regulator. Subramanian said that the RBI should act quickly and hold the board responsible.
Past experience
In the past, RBI has stepped in to oversee management transitions. The central bank had appointed a director on the board of RBL Bank in December 2021. This happened on the same day as then chief executive Vishwavir Ahuja went on leave. A ₹300-crore loan that was written off within seven months of being sanctioned emerged as the key reason for the banking regulator’s sudden intervention in RBL Bank, Mint reported, citing two people directly aware of the development.
At IndusInd Bank, RBI has allowed a ‘committee of executives’ to manage the bank’s operations.
Others said that if senior management knew of the discrepancies early, it is crucial to examine whether internal mechanisms to escalate issues up the bank’s hierarchy functioned effectively.
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Vaibhav Kakkar, senior partner at Saraf and Partners said that holding the board liable under securities law would depend on evidence showing either a failure to exercise reasonable diligence or a systemic breakdown in oversight, rather than mere lack of awareness.
Forensic review
While acknowledging the discrepancies, IndusInd also said it has appointed an independent professional firm to get to the bottom of the case. Reuters reported later that Grant Thornton was hired to conduct a forensic review.
Even if Mehta’s claim of being unaware is taken at face value, it raises questions on the bank’s internal processes.
“According to the Companies Act and Sebi regulations, the 15-month delay between when management became aware of a situation and when the board was informed indicates significant governance deficiencies that could make directors vulnerable to allegations of neglecting their oversight responsibilities,” said Diviay Chadha, a partner at Singhania & Co.
Apart from revealing the timeline, Sebi also cracked the whip on former top executives of the bank for alleged insider trading. It barred former managing director and chief executive officer Sumant Kathpalia, along with four other senior executives, from the market and impounded gains of ₹19.78 crore, alleging they sold shares while in possession of unpublished price-sensitive information (UPSI).
UPSI
Chadha of Singhania & Co. said the executives could argue that their trades were part of pre-approved “trading plans” set up before they became aware of UPSI, “though the burden of proof is substantial.”
Experts also pointed to the broader regulatory implications. Sebi’s view that price-sensitive information crystallized as early as December 2023 indicates an expansive view of what constitutes UPSI. “Delayed classification or disclosure of UPSI can not only invite regulatory sanctions but also impact market trust,” said Kakkar. “The determination of UPSI is not always clear-cut and often involves business judgment, which must be assessed on a case-by-case basis.”
Also read: IndusInd suspects fraud, sees steep Q4 loss
The issue of delayed disclosure was central to Sebi’s interim order of 28 May, which explicitly rejected IndusInd’s claim that it was waiting on a final report from KPMG.
“KPMG had given a figure of ₹2,093 crore to IBL suggesting the negative impact due to discrepancies, till 31 December 2023, through email dated 21 February 2024… however, these figures were neither reported through the exchange platform till March 10, 2025, nor were being classified to be UPSI by IBL till March 04, 2025,” Sebi stated.
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