IndusInd Bank to Face SFIO Probe Over ₹2,000-Cr Red Flag Despite Clean Police Finding

The Ministry of Corporate Affairs (MCA) has ordered a probe by the Serious Fraud Investigation Office (SFIO) into IndusInd Bank after auditors and forensic reports flagged major accounting irregularities, citing public interest concerns. This decision comes even as Mumbai Police's Economic Offences Wing (EOW) prepares to close its preliminary enquiry, having found no evidence of fund siphoning or diversion.

In its order, the central government referred to multiple ADT-4 filings made by the bank’s statutory auditors under Section 143(12) of the Companies Act, 2013, according to The Economic Times.

One such filing dated May 12, 2025, pointed to accounting discrepancies totalling ₹1,959.78 crore between financial year 2015-2016 (FY16) and financial year 2023-2024 (FY24). The reports highlighted accounting errors, the need for corrections and weaknesses in internal controls. Forensic monitoring reports submitted to the RBI were also considered.

The SFIO has been tasked with examining audit filings, forensic and internal audit reports, RBI submissions and findings of other agencies. Its mandate includes probing possible manipulation of accounts, misclassification of assets, related-party transactions, loans, investments and any diversion of funds, along with identifying beneficiaries, if found.

EOW Sees No Criminal Case

Running parallel to the SFIO probe, the Mumbai EOW said its enquiry, ongoing since August, has not found grounds to register an FIR. It had recorded statements of around a dozen current and former employees. EOW had also sought clarifications from the RBI on whether regulators were previously aware of the accounting issues and whether the bank’s hedging practices complied with norms.

In March, the Hinduja Group-promoted bank disclosed a ₹1,979-crore lapse in its derivatives portfolio. It also reported misstatements including ₹674 crore booked as microfinance income, ₹595 crore shown as unexplained assets and ₹172.6 crore wrongly classified as fee income. The bank said the total impact could reduce its net worth by about 2.35% as of December 2024, but insisted it had enough capital to absorb the hit.

Following RBI directions, PwC reviewed derivative transactions from April 2023 to June 2024, while Grant Thornton conducted a forensic audit covering FY16-FY24. The Grant Thornton report is understood to have named around 25 individuals linked to the lapses.

The EOW enquiry began after the bank itself reported the issues. Former CEO Sumant Kathpalia, ex-Deputy CEO Arun Khurana, former CFO Govind Jain and several suspended finance staff have been questioned.

Insider Trading Angle

Investigators are now also examining another accounting entry of about ₹250 crore. Some employees, who had recorded their statements, told investigators that foreign currency hedging was routine banking practice, prompting the EOW to seek RBI's view on whether such practices were permissible, according to a separate report by India Today.

The current management has accused the former leadership of causing wrongful loss to the bank. Whether accounting adjustments inflated the bank's share price and whether senior executives benefited through alleged insider trading is also being probed.

The accounting lapses, first detected in derivatives and later in microfinance, led to the resignations of CEO Sumant Kathpalia and Deputy CEO Arun Khurana in April 2025. Officials reportedly said the former top executives could be summoned again if required.