MC EXCLUSIVE Probe so far not pointing at fund siphoning at IndusInd Bank: EOW Sources

IndusInd Bank

An initial probe by the Mumbai Police’s Economic Offences Wing (EOW) on IndusInd Bank's treasury fraud case does not indicate, at least so far,  siphoning of bank funds, whether to the personal account of the bank's ex-officials or to any shell companies, sources at EOW told Moneycontrol.

“No evidence has been found till now about siphoning of funds,” an official said on condition of anonymity. "At this stage, there is nothing to suggest that actual monetary losses per se may have been caused to the bank," he said, indicating that the losses were notional.

According to people in the know, the EOW wing of the Mumbai Police has so far questioned about 6- 7 people in connection to the case. This includes former CEO of the bank, Sumant Kathpalia, former Chief Financial Officer (CFO) Gobind Jain and former Deputy CEO Arun Khurana. The probe is focused on alleged accounting lapses.

Siddharth Banerjee, IndusInd Bank's head of global market and financial institutions group is also expected to be questioned in the coming days. He was not among those interrogated so far.

Police officials investigating the case indicated that the investigation is at the halfway mark, and by end of October they would have a better understanding of the gravity of the issue and criminality, if any.

The person cited above indicated that at this juncture the matter appears to be an instance of omission of responsibilities in terms of following the required processes  and not one where people involved may have made wrongful gains.

However, the sources cited said , "a certain entry amounting to Rs 250 crore requires attention.”. They added that these entries may pertain to 2016, a year after the treasury derivatives desk was started. The next round of questioning of former and current employees of the bank is expected to be around this aspect.

On September 24, Moneycontrol reported that EOW had recorded the statement of former IndusInd Bank CEO Sumant Kathpalia in connection with the probe into accounting lapses.

The issues roiling IndusInd Bank became public in March when the lender reported an accounting discrepancy linked to its derivatives portfolio. Subsequent reviews by an external agency and a Board-appointed independent professional firm estimated the adverse accounting impact at approximately Rs 2,000 crore.

Sebi Interim Order

Further, the Securities and Exchange Board of India's (SEBI) interim order released on May 27 revealed that the management of IndusInd Bank was aware of the derivatives discrepancies 15 months before the lender disclosed them to the exchanges.

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 based on unpublished price-sensitive information. The others included Sushant Sourav, Rohan Jathanna and Anil Marco Rao.

Email Trail

On October 13, Moneycontrol reported that the email trails indicate that IndusInd Bank’s controversial accounting practices on treasury-related aspects, particularly those involving foreign exchange (forex) contracts, that came into the public domain in March 2025, may have been known internally since 2017 or even earlier. Emails dating from that year suggest that potential problems were known and discussed among senior officials.

These emails discuss the possible impact of the accounting practices on the bank’s bottomline and its net worth, many years before the matter came into the public domain.

According to an email dated June 29, 2017, Arun Kharana, who was then the country head – Global Market Group said: “I don't think we should make it to complicated as I will definitely hedge irrespective of treatment etc. In fact, in the past also we never sought approval of alco for hedging exposures. Since this is a longer tenor, I thought it was prudent. Maybe we should just circulate to alco members for concurrence. I have already discussed this with MD".