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The stock market regulator has closed its investigation into potential insider trading violations by top IndusInd Bank executives, a person aware of the matter said, as it found all disclosures in place and no evidence of wrongdoing.
The Securities and Exchange Board of India (Sebi) had sought information from the private lender about the trades executed by Sumant Kathpalia and Arun Khurana—IndusInd Bank’s chief executive officer (CEO) and deputy CEO who have since resigned—while they were in possession of unpublished price-sensitive information.
“Sebi asked for some data, but nothing was found. Because it (the trade) was done after they vested the Esops. It was announced. They didn’t do it without informing,” the person said on the condition of anonymity, adding all disclosures were made.
In March, IndusInd Bank reported improper accounting in forex derivatives that blew a ₹1,960 crore hole in its books, triggering a crash in its stock price, audits by PricewaterhouseCoopers (PwC) and Grant Thornton, and the exit of top executives amid regulatory scrutiny. “It is routine for company officials to sell shares to fund their vesting Esops and pay tax, or sometimes just as a routine means of encashing their stock-based pay. Unless it is proven that an outsized amount of shares were sold just before the information became public, it can’t be stated that insider trading occurred. There needs to be specific charges with specific evidence to prove insider trading,” said Sandeep Parikh, managing partner, Finsec Law Advisors.
Emails sent to Sebi, IndusInd Bank, RBI and the two former executives went unanswered. Kathpalia and Khurana also did not respond to calls and messages.
According to stock exchange disclosures, between May 2023 and June 2024, Kathpalia sold nearly 950,000 shares worth roughly ₹134 crore, while Khurana sold 550,000 shares valued at ₹82 crore. These shares were acquired through the bank’s employee stock ownership plan.
News of the sale attracted attention since it happened against the backdrop of an RBI circular in September 2023 on valuing banks’ investment portfolios. It had said that all derivatives must be marked to market (MTM), which requires valuing assets and liabilities according to the prevailing market price. The rules took effect on 1 April, 2024.
For years, IndusInd Bank had been following differential accounting rules in hedging forex borrowings. In a TV interview in March, Kathpalia said the bank stopped the practice from 1 April, 2024, switching to mark-to-market accounting. He said the bank had discovered the anomaly only in October 2024, and had initiated an external review by the PwC. However, it was not until February 2025 that the bank disclosed this information to the exchanges.
Following this, the bank’s board appointed Grant Thornton to do a forensic audit to spot the root cause of the discrepancies, assess the correctness and impact of the accounting, and establish accountability.
Mint reported on Wednesday that the forensic audit revealed that IndusInd’s erstwhile deputy CEO Khurana was aware of the incorrect accounting of derivative trades that led to a ₹1,959 crore hole in its books.
