IndusInd Bank Faces New Heat as MCA Hints at Serious Fraud Probe

In what appears to be a deepening crisis for IndusInd Bank, the Ministry of Corporate Affairs (MCA) has likely found early evidence of corporate governance violations during a suo motu inquiry into alleged accounting lapses, a report by CNBC-TV18 said. The ministry is said to be weighing whether to escalate the probe to its Directorate General of Investigations or hand it over to the Serious Fraud Investigation Office (SFIO), a move that could potentially trigger criminal proceedings.

The bank, for its part, has not received any formal communication from the MCA yet. But this latest development adds to an already growing chorus of regulatory scrutiny surrounding the private lender.

Earlier this year, IndusInd stunned investors by disclosing multi-crore discrepancies in its derivative and microfinance books. The first blow came in March, when the bank admitted to accounting lapses in its internal foreign exchange derivative contracts, forcing it to slash its reported net worth by nearly ₹1,979 crore. The stock shattered almost 27% intraday on the news, prompting RBI to assure markets of the bank’s solvency but simultaneously calling out “serious weaknesses in governance.”

As if that weren’t enough, another ₹674 crore discrepancy were revealed in May, this time tied to its microfinance portfolio. The bank conceded to wrongly booking over ₹595 crore under “other assets” and ₹79 crore as interest income. Both the entries lacked backing and were reversed in Q4 FY25.

Multiple watchdogs have since swooped in. Sebi is probing potential insider trading by former top brass, ex-CEO Sumant Kathpalia and Deputy CEO Arun Khurana, both of whom who allegedly sold shares before the lapses were disclosed. A forensic audit by Grant Thornton reportedly flagged these transactions, and Sebi has barred both from accessing the markets for now.

Meanwhile, the RBI is closely monitoring internal restructuring at the bank, having privately raised red flags over “deep-rooted control lapses.” ICAI, too, is running a parallel probe into whether IndusInd’s statutory auditors failed in their duty, with possible disciplinary action on the table.

Now, with the MCA entering the fray, the regulatory narrative pivots toward questions of board-level accountability and adherence to the Companies Act. According to the CNBC-TV18 report, preliminary findings highlight three key areas of concerns.

First, the board’s failure to detect and address misstatements. Second, improper financial transaction recording and final being the potential suppression of material facts from regulators and investors.