IndusInd Bank management was aware of derivatives discrepancies 15 months before disclosure: SEBI

SEBI has barred former MD & CEO IndusInd Bank Sumant Kathpalia, former Deputy CEO Arun Khurana and three others for alleged insider trading. SEBI in its interim order found that they traded during the existence of Unpublished Price sensitive information. The others included Sushant Sourav, Rohan Jathanna and Anil Marco Rao.

SEBI whole-time member Kamlesh Chandra Varshney in his interim order noted that “All the Noticees, viz. Noticee Nos. 1 to 5 are hereby restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders”.

“The foregoing prima facie observations contained in this Order are made on the basis of the material available on record. The Noticees may, within 21 days from the date of receipt of this Order, file their reply/ objections, if any, to this Order and may also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed in that regard,” the SEBI order said.

The email trail

Soon after the inter-department team noticed the discrepancies, the bank's then Chief Financial Officer, Arun Khurana, through email dated November 2023, informed the then CEO Sumant Kathpalia, Head- Treasury Operations, Sushant Sourav, and Head- GMG Operations, Rohan Jathanna.

“Enclosing my earlier email and yet to see the impact analysis of derivative accounting. Every six months we get big impact in proforma IndAS reporting," Khurana said in the first mail.

Again in an email dated November 21, 2023, sent in the same trail, the CFO stated: “We already have done exercise in the past with KPMG while preparing for submission of the proforma IndAS financial statement to Bank. There is already an information being prepared on a six monthly basis for impact of IndAS on derivative accounting.”

After this, some more emails were exchanged by the officials with the management.

The preliminary examination of SEBI further revealed that an email dated November 30, 2023, was sent by Head – Accounts addressed to employees of the bank, including Sushant Sourav, and CC thereof was also marked to Anil Marco Rao, Chief Administrative Officer (CAO)-Consumer Banking Operations.

In this email, a figure of Rs 1749.98 crore had been reported representing the impact due to discrepancy in account balances of the derivative portfolio. Since the date of the email is November 30, 2023, and the last quarter end before this date was quarter ending September 2023, it can be reasonably inferred that the figure mentioned was for the said impact i.e. quarter ending September 30, 2023, SEBI said in its order.

Insider trading

On the insider trading front, SEBI's examination of emails shared by IndusInd Bank and KPMG, showed that Arun Khurana sold a total 3,48,500 shares during the Unpublished Price Sensitive Information (UPSI) period while being in possession of the UPSI and no shares were bought during the UPSI period.

Sumant Kapthpalia sold 1,25,000 shares of the bank, Sushant Sourav sold 2,065 shares, Rohan Jathanna, Head – GMG Operations sold 2,000 shares, and Anil Marco Rao sold 1,000 shares.

When the disclosure was made on March 10, 2025, the share price of IndusInd Bank crashed 27.165 percent from a close price of Rs 900.60 on March 10, 2025, to a close price of Rs 655.95 on March 11, 2025.

The value of Arun Khurana’s share sale was Rs 52,98,58,371, Sumant Kathpalia Rs 19,17,03,566, Sushant Sourav Rs 26,29,083, Rohan Jathanna Rs 25,30,630, and Anil Rao was Rs 14,50,826.

The total loss avoided by these people was 27.165 percent, which translates to Rs 19,78,08,053.

SEBI's order noted that the insider trading done by the management having crucial price-sensitive information caused notional loss to innocent investors, who did not have free and equal access to the information.

The regulator said it also has the effect of interfering with the development of the securities market, as investors tend to lose faith in the securities market if such violations go unpunished.

"Indulging into insider trading activities while being an insider and being in possession of UPSI tantamounts to committing fraud upon the innocent investors and jeopardising their interest, who did not have access to the material information," the SEBI order said.