Did IndusInd’s Ex-CEO Kathpalia Trade on Insider Info? Grant Thornton Audit Raises Red Flags

More details have emerged from Grant Thornton Bharat’s forensic audit report on scandal-hit IndusInd Bank and its derivative accounting lapses. The report had earlier led to the resignations of two top executives—CEO Sumant Kathpalia and Deputy CEO Arun Khurana.

According to Reuters, the forensic audit revealed that both executives traded in the bank’s shares while being aware of accounting irregularities—before those issues were made public. The news agency cited findings from Grant Thornton's audit.

India’s fifth-largest private lender had appointed Grant Thornton to conduct an independent forensic investigation after it disclosed in March that accounting lapses in its internal derivatives trades—non-compliant with RBI regulations—had impacted about 2.35% of its net worth. This was later revised to 2.27%, or approximately Rs 1,979 crore.

Now, Reuters reports that Grant Thornton’s summary findings indicate Kathpalia and Khurana traded IndusInd shares “during a period of seeming non-disclosure.” This conclusion was based on a review of internal accounts and communications.

The report also raised the possibility of insider trading, stating:
“Considering that employees had knowledge of incorrect accounting and/or its impact but traded in shares of IBL during the period may also require a determination from an insider trading perspective.”

How Much Did IndusInd Executives Trade?

The document did not implicate other executives in trading but did reference one additional executive’s handling of information related to the lapses.

According to the report, between March 2024 and March 10, 2025, Kathpalia sold shares worth Rs 283.48 million ($3.3 million) and purchased shares worth Rs 102.71 million. During the same period, Khurana sold shares worth Rs 320.72 million.

The audit also criticised the bank’s lack of “accounting analysis and rigour,” highlighting a “less than adequate” emphasis on internal controls. The findings were shared with both IndusInd Bank and the Reserve Bank of India (RBI).

On April 27, IndusInd Bank disclosed via an exchange filing that a review by an “independent professional firm” had confirmed incorrect accounting and that it was taking “necessary steps to fix accountability.”

A day later, Deputy CEO Arun Khurana resigned, citing “unfortunate developments.” Soon after, CEO Kathpalia stepped down, taking “moral responsibility” for the lapse. Earlier, a Mint report had claimed Khurana was aware of the issue well before it became public.

Grant Thornton’s findings also indicate that several finance and treasury staff were aware of the accounting issues, with concerns raised as early as May 2015 by the Market Risk team, according to Reuters. Internal emails cited in the report suggest attempts to delete or suppress key communications, though no names were disclosed in that context.

The audit report systemic weaknesses, including manual accounting processes, poor documentation, and weak standard operating procedures. The RBI has since approved the formation of an interim executive committee to oversee the bank’s operations until a new CEO is appointed.