IndusInd Bank Faces ₹2,000-Crore Hit After Whistleblower Flags Accounting Lapses

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IndusInd Bank Accounting Lapses Since 2015: Ex-CFO Flags ₹2,000 Crore Losses, Insider Trading Claims

IndusInd Bank is facing scrutiny over alleged accounting irregularities dating back to 2015. Former Chief Financial Officer (CFO) Gobind Jain has blown the whistle, claiming senior management was aware of the lapses and even indulged in
insider trading. He repeatedly urged for an external audit before resigning, while the bank eventually disclosed significant losses.

Whistleblower’s Submissions

In his submissions to Mumbai’s Economic Offences Wing (EoW), Jain alleged that accounting issues in the bank’s derivatives portfolio date back to 2015. He said the
board, senior management, and former finance chief SV Zaregaonkar were aware of the problem.

Jain furnished multiple documents including four resignation letters beginning April 2024, in which he urged then Managing Director & CEO Sumant Kathpalia to appoint an external
auditor. He also shared a December 1, 2021 email in which Zaregaonkar warned Kathpalia that accounting losses from derivatives MTM hits could reach ₹700 crore.

Bank’s Response

A spokesperson for IndusInd Bank said the lender had disclosed suspicions of fraud involving certain employees
and was taking appropriate legal steps. “The matters have been reported as ‘fraud’ to the Reserve Bank of India (RBI) and complaints have been filed with relevant law enforcement agencies,”
the spokesperson added.

Jain, Kathpalia, former Deputy CEO Arun Khurana, and Zaregaonkar did not respond to queries.

Timeline of Resignation Letters

Jain’s earliest resignation letter was dated June 11, 2024, almost 10 months before the bank disclosed its accounting lapses to the stock exchanges. He stepped down immediately, but on
September 29, 2024, he again pressed Kathpalia to order an external audit.

“You may recall that I had resigned from the services of the bank on June 11, 2024 and as suggested by you I had kept my
resignation on hold, on an agreed understanding that you would order a detailed audit by a reputed external and independent
audit firm… Unfortunately, the audit has not started, and the issues remain. I am convinced an audit will help unravel
these issues.” — Gobind Jain’s letter to Sumant Kathpalia

In the same letter, Jain raised concerns about his personal liability:

“As I hold a statutory position the lack of any action has put me in a risky position. Unless I communicate with those
charged with governance, my continuation will seriously affect me and my career.”

On September 30, 2024, Jain pressed again for the appointment of PwC to audit the transition between
the old Calypso system and the new version, emphasizing the need to confirm that there were
no accounting anomalies.

Regulatory Concerns

Jain told the EoW that IndusInd Bank had also violated Sebi’s Listing Obligations and Disclosure Requirements (LODR),
which mandate listed companies to disclose resignations of key officials.

His resignation was finally accepted on January 17, 2025, though he has yet to receive a relieving letter.

Financial Impact

On March 10, 2025, IndusInd Bank disclosed that it could face a hit of ₹1,577 crore due to discrepancies in derivatives transactions spanning five to seven years. After multiple audits, the bank ultimately recognized nearly
₹2,000 crore of one-time losses in its March quarter earnings.

Timeline at a Glance

Investigations Underway

The case has now drawn the attention of law enforcement agencies, including investigations into possible
insider trading by bank executives. Both the EoW and
RBI are monitoring the developments as the scandal unfolds.

Source: Economic Times / Reuters | This article has been rewritten for clarity and completeness.