How a Whistleblower Blew the Lid Off IndusInd's Accounting Pandora's Box

IndusInd Bank has faced a Rs 1,960 crore loss on its derivatives portfolio, a management shake-up, and an ongoing investigation into its microfinance business since early March. A new report suggests it all began with a whistleblower letter sent to the bank’s board of directors and the Reserve Bank of India (RBI).

According to The Economic Times (ET), the letter was sent to the bank’s senior management just days before CEO Sumant Kathpalia received a one-year extension from the RBI on March 6—far shorter than the board’s recommended three-year term. Just days later, on March 10, the private lender disclosed accounting lapses in its derivatives portfolio, triggering a 27% drop in its stock price.

While the derivatives issue was still under review by two external auditors, reports surfaced that the bank had hired an audit firm to investigate a Rs 600 crore discrepancy in interest income recognition in its microfinance portfolio. In an exchange filing, the bank later clarified that the firm was supporting its internal audit team in this matter.

What the Whistleblower Letter Revealed

The ET report says the whistleblower letter raised concerns about both the derivatives lapses and issues in the microfinance portfolio.

The report also claims that the bank’s internal audit department is now examining another issue involving a series of past accounting reversals—specifically in the ‘Other Assets’ and ‘Other Liabilities’ sections of the financial statements. The whistleblower also flagged an inappropriate relationship between a senior executive and an employee who was terminated and later rehired by the same executive.

Citing an anonymous senior bank employee, the newspaper reported that the whistleblower met CEO Kathpalia personally to discuss the allegations. The letter also prompted the joint auditors, Chokshi & Chokshi and MSKA & Associates, to request a forensic audit of both the derivatives portfolio and the Rs 600 crore discrepancy in the microfinance business.

Where Things Stand Now

The issues in the derivatives portfolio were examined by PwC and Grant Thornton Bharat. On April 26, the bank announced that the total adverse accounting impact on its earnings would be Rs 1,960 crore as of March 31, 2025.

Reports claimed that Grant Thornton raised allegations of insider trading against CEO Sumant Kathpalia and Deputy CEO Arun Khurana. Both have since resigned from the company, although neither has publicly responded to the charges.

The bank is now overseen by a two-person, board-appointed committee.

Meanwhile, the internal audit team, supported by EY, continues to investigate both the microfinance accounting gaps and the questionable accounting entry reversals.

The stock exchanges have sought clarification from IndusInd Bank over the whistleblower report.