Ex-CFO Claims IndusInd Accounting Scandal Covered Up by Chair, Writes to PM Modi; Bank Refutes Allegations

IndusInd Bank Chairman Sunil Mehta and his aides have been accused of covering up accounting irregularities that were revealed in the early months of 2025. The Hinduja Group-owned bank reported these irregularities as “suspected fraud”, which led to a quarterly loss of about ₹2,000 crore. Following the disclosure, the bank’s top executives — CEO Sumanth Kathpalia and Deputy CEO Arun Khurana — stepped down.

According to reports, former CFO of IndusInd Bank, Gobind Jain, has written to Prime Minister Narendra Modi, stating that he was the one who first identified long-standing irregularities in the bank’s treasury operations, which he claims continued for over a decade. Jain said he was the sole executive to flag the lapses, describing his efforts as a “lone battle” to bring the matter to light.

Jain resigned from the private lender in January, months before the first derivative accounting lapse became public. In his resignation, filed with the exchange, he cited pursuing opportunities outside the bank or within the promoter group.

What the Ex-CFO Alleged

The letter, first reported by the Economic Times, was sent on August 26. In it, the former IndusInd CFO accused Chairman Mehta and his close aides of fostering a “climate of fear” within the institution, targeting him for raising concerns, and shielding those responsible. He urged the government to suspend Mehta and launch an independent inquiry. Jain reportedly claimed to have documentary evidence supporting his allegations and expressed his willingness to cooperate with any authority appointed to investigate. He wrote that he had suffered both financially and emotionally as a result of retaliation.

He further alleged that statutory and forensic audit reports had been influenced by the board in return for large fees, while regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) avoided taking direct action. According to him, even though consultants and auditors were engaged, their findings were tailored to protect the board’s interests.

He questioned why the chairman, members of the risk committee, and other senior executives remained in their posts despite losses of around ₹2,000 crore becoming evident. Jain maintained that the CEO and other senior officials resigning months after his own departure did little to address accountability at the bank.

Bank Denies Allegations

In a statement shared with the media, IndusInd Bank denied the allegations, calling them “completely devoid of merit.”

“The bank categorically rejects these allegations against the board chairman and others, which are completely devoid of merit and an attempt to deflect due process of law and accountability,” the bank said in a statement on Thursday.

“The board has collectively taken decisions to address incidents of gross irregularity, suspected fraud, and dereliction of duty that were brought to its attention. The bank has made disclosures in a fair and transparent manner based on investigations conducted by independent internal and external experts,” it added.

According to the ET report, the bank said its board promptly disclosed accounting discrepancies in derivatives, microfinance, and other revenue streams to stock exchanges between March and May. It appointed external agencies for independent investigations, reported suspected frauds to the banking regulator, and filed complaints with the SFIO and Mumbai EOW.

The bank urged the ministry to dismiss Jain’s complaint, arguing that he is attempting to obstruct ongoing probes while the board has acted diligently and transparently.

What Happened at IndusInd Bank?

A series of stock exchange disclosures, followed by an audit of its accounts, revealed multiple irregularities at IndusInd Bank. The matter first became public on March 10, 2025, when the bank disclosed discrepancies in its derivative portfolio, later validated by an independent review. On March 20, the board appointed Grant Thornton to probe further, uncovering that from FY16–FY24, “internal trades” had been wrongly accounted, leading to a ₹1,958.98 crore write-off.

Its Q4 FY25 results also revealed microfinance income misstatements, unrecorded interest payments, and prior-period errors, totalling adjustments of about ₹2,600 crore.

Soon after, CEO Kathpalia and his deputy Khurana resigned amid reports of suspected insider trading. The allegations were later confirmed by SEBI in an interim order. Meanwhile, the bank's shares have plunged, declining by about 22% so far this year. On Friday, it was trading at ₹757, up just 0.3% at 2:17 PM.

Rajiv Anand, former deputy managing director of Axis Bank, has recently taken charge as MD & CEO of IndusInd Bank