The Serious Fraud Investigation Office (SFIO), functioning under the Ministry of Corporate Affairs, has initiated an extensive probe into alleged accounting irregularities exceeding Rs 2,000 crore at IndusInd Bank, following preliminary findings by the Mumbai Police’s Economic Offences Wing (EOW). The investigation has been ordered under Section 212 of the Companies Act, signalling the seriousness of the allegations and the scale of scrutiny the bank’s past operations are now facing.
According to sources familiar with the matter, the SFIO inquiry will concentrate on suspected irregularities in derivatives accounting practices and allegations that profits were overstated over a sustained period. The probe will closely examine the roles of former Chief Executive Officer Sumant Kathpalia, former Deputy CEO Arun Khurana, and other senior officials who were part of the bank’s top management during the period in question.
Earlier, the EOW had recorded statements from around a dozen current and former employees, including individuals from the bank’s erstwhile leadership team. Investigators are said to be analysing the matter from multiple angles and have sought detailed clarification from the Reserve Bank of India (RBI) regarding applicable banking regulations, particularly those governing foreign currency hedging and treasury operations.
In addition to the main accounting discrepancy estimated at Rs 1,900 to Rs 2,000 crore, investigators are also examining another accounting entry of approximately Rs 250 crore. Employees who have already provided statements reportedly told investigators that foreign currency hedging was a routine banking practice. The EOW has now approached the RBI to ascertain whether such practices were in compliance with prevailing regulatory norms at the time.
Sources further indicated that bank officials have maintained that provisions were made whenever shortages were reflected in accounts, a practice they claim has been in place since 2023. Investigators have noted that the trading desk at the centre of the controversy was established under the supervision of then-Deputy CEO Arun Khurana, who was allegedly fully aware of its functioning and day-to-day operations.
The Grant Thornton forensic audit commissioned by IndusInd Bank has also been handed over to the police as part of the investigation. The audit report reportedly suggests that the bank’s top management had knowledge of the accounting lapses as early as 2023. The EOW is currently seeking legal opinion to determine whether these lapses constitute criminal offences under applicable laws.
The present management of IndusInd Bank has accused the former leadership of causing wrongful loss to the institution. Investigators are assessing whether the alleged losses were purely notional in nature, arising from a sharp decline in the bank’s share price and market capitalisation after the accounting issues were disclosed to the public.
Police are also probing claims that members of the former top management may have derived financial benefits from the disputed accounting adjustments, which allegedly inflated the bank’s stock price. Investigators are examining possible instances of insider trading and whether such activities resulted in gains running into hundreds of crores.
The accounting irregularities were initially detected in the bank’s derivatives portfolio and later extended to its microfinance business, developments that ultimately led to the resignations of CEO Sumant Kathpalia and Deputy CEO Arun Khurana in April 2025. The EOW has already questioned Kathpalia, Khurana and former Chief Financial Officer Gobind Jain on two occasions, and officials have indicated that the trio could be summoned again if the investigation so requires.
Former CFO Gobind Jain had earlier flagged treasury-related irregularities amounting to over Rs 2,000 crore, allegedly spanning nearly a decade. In a letter dated August 26 addressed to the Prime Minister’s Office, Jain claimed that serious lapses had been occurring in the bank’s treasury operations for several years, further deepening concerns around governance and internal controls at the lender.
