IndusInd Bank Flags Suspected Fraud; Says Key Employees May Be Involved - Timeline Of Events Explained

IndusInd Bank has reported findings from internal and external investigations that point to serious accounting lapses in its financial reporting, with the Board now suspecting fraud.

In an exchange filing, the private sector lender disclosed discrepancies in internal derivative trades, unsubstantiated balances in “other assets” and “other liabilities,” and incorrectly recorded microfinance fee income.

"The Bank had received reports of investigations carried out by external professional firm and the Bank’s Internal Audit Department (IAD) relating to accounting of internal derivative trades, certain unsubstantiated balances in 'other assets' and 'other liabilities' accounts of the Bank, micro finance interest income (previously disclosed on April 27, 2025 and May 15, 2025)," IndusInd Bank said in its filing.

The IAD submitted its report on May 20, 2025, determining that a cumulative amount of Rs 172.58 crore was incorrectly recorded as fee income over three quarters ending December 2024 and later reversed in Q4 FY25.

"Based on review of all these reports, the Board suspects the occurrence of fraud against the Bank and the involvement therein of certain employees having a significant role in the accounting and financial reporting of the Bank," the lender added.

The accounting lapses in the bank’s internal derivative portfolio have led to a Rs 1,979 crore post-tax negative impact on its net worth, or 2.27% as of December 2024. This is slightly lower than the 2.35% impact previously reported in April.

IndusInd Bank Fraud Timeline

The unfolding saga at IndusInd Bank has taken several dramatic turns in recent months, marked by financial discrepancies, executive exits, and multiple rounds of investigations.

Here's a simplified breakdown of how the events transpired

March 2025 – Initial Red Flags and RBI Intervention

On March 10, 2025, IndusInd Bank first disclosed "discrepancies" in its internal derivatives trading portfolio. The bank estimated a potential financial impact of Rs 1,900-2,000 crore and announced that an external agency had been appointed to verify findings from internal checks.

As concerns rose among depositors and stakeholders, the Reserve Bank of India (RBI) stepped in on March 15, releasing a public statement to reassure depositors and prevent panic. A few days later, on March 20, the bank’s Board ordered a fresh external investigation, which would also include a root cause analysis and identify individuals accountable for the lapses.

April 2025 – Microfinance Accounting Issues & Top-Level Resignations

The matter intensified in April when, on April 22, the bank disclosed new issues in microfinance accounting. Its Internal Audit Department began reviewing the matter with the support of EY (Ernst & Young).

The next major update came on April 27, when the board-appointed agency submitted its report, concluding that the discrepancies would lead to a financial hit of Rs 1,960 crore. The fallout was swift: on April 28, Deputy CEO Arun Khurana resigned with immediate effect, followed by MD & CEO Sumant Kathpalia’s resignation the very next day, April 29.

Also Read: IndusInd Bank Tumbles 4% As Accounting Woes Prompt Brokerages To Lower Projections

In response, the Board appointed a temporary executive committee on April 30 to manage the bank’s operations while a new CEO search was initiated.

May 2025 – Insider Trading Concerns & Further Accounting Lapses

On May 9, the bank made another significant disclosure. The Board revealed that certain aspects of the ongoing review may require scrutiny from an insider trading perspective, hinting at possible misuse of sensitive financial information.

Then on May 15, two additional accounting irregularities came to light. The bank said it had recorded Rs 674 crore of incorrect interest income in its microfinance division and also reported Rs 595 crore in unsubstantiated balances in its “other assets” accounts.