IndusInd Bank is facing the most intense regulatory scrutiny in its history, with fresh whistleblower complaints now drawing in NFRA and SEBI simultaneously as the bank’s multiple overlapping crises — a forex derivatives accounting scandal, an insider trading case involving a former senior official (as reported by ETNOW), and a ₹1,960 crore provision against earnings — continue to deepen.

The original crisis: forex derivatives and the ₹1,960 crore provision

The IndusInd Bank crisis traces its origins to accounting irregularities in the bank’s foreign exchange derivatives book — complex internal hedge transactions that were used to either inflate profits or conceal losses depending on currency movements, allegedly by a group of senior officials over a period of more than five years between 2017 and 2024. A whistleblower — a senior finance employee at the bank — sent a letter to the RBI and the bank’s board just before RBI granted a one-year extension to then-CEO Sumant Kathpalia in March, highlighting a ₹600-crore discrepancy in interest income from the bank’s microfinance portfolio and a questionable relationship between a senior executive and an employee who was terminated and later rehired.

The whistleblower letter triggered deeper scrutiny into foreign exchange derivative deals, leading to the resignations of CEO Sumant Kathpalia and Deputy CEO Arun Khurana, and the bank making a ₹1,960-crore provision for Q4FY25. Grant Thornton, appointed as the main forensic auditor, submitted its report on April 26, 2025. The next day, IndusInd Bank announced the ₹1,960-crore adverse earnings impact.

IndusInd Bank had initially reported a ₹1,529 crore impact from these discrepancies in March 2025. However, the forensic investigation by Grant Thornton highlighted that executives knew about these problems much earlier — in December 2023 — but delayed informing the public.

NFRA: auditor notices and the derivatives cover-up question

NFRA has sent notices to existing auditor MSKA and Associates — a member of BDO Global — as well as many former auditors of the bank, requesting entire audit files for respective years from all statutory auditors who signed the accounts since 2017, due to accounting irregularities in the IndusInd derivatives book over a period of time.

NFRA has reached out to a number of audit firms that worked with IndusInd Bank since 2017, including PwC for the period 2015-16 to 2017-18, S.R. Batliboi and Co., Haribhakti and Co., and M.P. Chitale and Co. Sources said NFRA is trying to determine whether auditors failed to detect or reported misleading accounting related to forex derivatives — an area that allowed the bank to either inflate profits or conceal losses depending on currency movements. In 2024, auditors had excluded valuation of derivatives as a key audit matter from the annual report — after including it the year before — raising questions about intent and diligence.

The fresh whistleblower complaints received in May 2026 are now adding a new layer to NFRA’s existing investigation, with sources indicating the regulator is examining whether the full scope of accounting irregularities was disclosed to auditors and whether the audit committee properly discharged its oversight function.

SEBI: insider trading, clean chit, and the Audit Committee recordings

Running parallel to the NFRA probe is a SEBI investigation into alleged insider trading by a former zonal head of IndusInd Bank. The bank’s chief internal vigilance report found that Samir Agarwal, the then zonal head of eastern India, used family members’ accounts and based on insider information, traded in equity shares of Kesoram Industries — with the family undertaking unauthorised trades of ₹816 crore and booking a profit of ₹53.15 crore, inclusive of insider trading profit of nearly ₹36.10 crore.

Despite having all the necessary confirmation on unauthorised trades and insider trading, the bank’s leadership did not inform SEBI and the stock exchange about it — as mandated by regulations — in what the whistleblower has called a massive cover-up. The bank’s company secretary confirmed in writing that Agarwal, as a zonal head, was a designated person falling under the purview of insider or connected person as per SEBI PIT Regulations, 2015.

SEBI officials from the investigation department visited IndusInd Bank’s Andheri office and questioned personnel from the compliance and secretarial departments. The regulator is examining how internal concerns over suspicious trading activity were handled. SEBI has sought access to recordings and documents related to Audit Committee Board meetings where the matter was allegedly discussed before being dropped — following a legal opinion obtained from a former judge which was used to justify not reporting the matter to SEBI. The trades under SEBI’s scrutiny involved shares of several Kolkata-based companies including Kesoram Industries, Birla Tyres, and Eveready Industries.

SFIO: summons to former top management

The Serious Fraud Investigation Office has summoned former CEO Sumant Kathpalia, former CFO Gobind Jain, and former Deputy CEO Arun Khurana for questioning in connection with the accounting irregularities investigation. The federal agency is seeking explanations regarding the alleged irregularities.

The Securities Appellate Tribunal has dismissed an appeal filed by former Deputy CEO Arun Khurana seeking access to a broader set of SEBI investigation records in the ongoing insider trading probe, after Khurana challenged a December 2025 communication from SEBI asking him to appear for a personal hearing.

The regulatory picture as of May 2026

IndusInd Bank now faces simultaneous regulatory attention from four agencies — SEBI on insider trading and Audit Committee conduct, NFRA on auditor conduct and derivatives accounting, SFIO on management’s alleged role in the accounting fraud, and the RBI which continues to oversee the bank’s remediation plan. The fresh whistleblower complaints reported in May 2026 have added a new vector of scrutiny at a moment when the bank is already managing the reputational and financial consequences of the ₹1,960 crore provision, the departure of its top two executives, and an ongoing forensic audit.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.

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