The board of IndusInd Bank is considering imposing penalties on two officials who were at helm of affairs of the bank till recently -- former MD & CEO Sumant Kathpalia and Deputy CEO Arun Khurana. As per sources aware of the development, the bank’s board has been deliberating on the matter and met a few times to discuss the issue. Further, legal opinion has also been sought on the issue.
“The board can't ignore the findings of the Grant Thornton report, which has indicated that MD, Deputy CEO were aware of the currency derivatives accounting discrepancy issue, and they transacted in the bank stocks before the issue became public, “said one of the sources cited.
Another source added that the revelation by Grant Thornton--- which has carried out a forensic audit--- has forced the board to take note of the violation and decide on the quantum of penalty as per the banks internal insider trading policy. As per the source, the internal insider trading policy suggests penalties based on the number of incidents of violation of insider trading code.
The board has studied the trades carried out by Kathpalia and Khurana and is evaluating the possibility of imposing penalties on the two bankers. As per the bank’s insider trading policy, it will have to give time to the two bankers to respond to the allegations, before making a final view and imposing a penalty.
Emails sent to IndusInd Bank did not elicit any response. Emails and messages sent to Sumant Kathpalia and Arun Khurana also did not elicit any reply. This story will be updated if any response is received.
Notably, in July last year, the lender had imposed a penalty of Rs 5 lakh against an independent director of the bank, Bhavna Doshi, for what has been described as inadvertent trading in 667 shares of IndusInd Bank during a period in which trading was frozen.
If the bank’s board imposes a penalty for violation of its insider trading policy, then the market regulator Securities and Exchange Board of India (SEBI) may also proceed against the two bankers. As per SEBI regulations, listed companies are required to have their own insider trading policy in line with SEBI’s Insider Trading regulations, applicable for designated persons. In simple terms, designated persons are key people of the company who have non-public price sensitive information in their possession.
In response to clarification sought by exchanges, IndusInd Bank had issued a statement on May 9. In the statement, the bank mentioned the Grant Thornton report and said, “The report delivered to the Bank on April 26, 2025, has identified certain aspects which may require a determination from an insider trading perspective”. “The Bank is examining these findings in the Report and based on the outcome of such examination, the Bank will take the necessary steps under applicable law (including the Bank’s Insider Trading Code),” as per the clarification.
IndusInd Bank on 10 March had admitted that there was a discrepancy and on 20 March disclosed it had appointed a forensic auditor to identify the cause of the discrepancy. The forensic auditor, Grant Thornton, submitted its report on 26 April, and determined a cumulative adverse accounting impact on the profit and loss (P&L) account of Rs 1,959.98 Cr as on 31 March, 2025.
As per IndusInd Bank, the forensic audit report identified incorrect accounting of internal derivative trades, especially in case of early termination of those trades, which resulted in recording of notional profits, as the principal root cause for accounting discrepancy.
The report also examined the roles and actions of key employees in this context. The bank also said, the board is taking necessary steps to fix accountability of the persons responsible for these lapses and re-align roles and responsibilities of senior management.
Khurana resigned on April 28 and in his resignation, letter mentioned the events resulting in the discrepancy as ‘unfortunate’. Khurana had oversight of the Treasury function of the bank.
A day letter, MD&CEO Sumant Kathpalia also resigned.
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