In a fresh regulatory setback for IndusInd Bank, the Ministry of Corporate Affairs (MCA), which had initiated a “suo motu inquiry” into alleged accounting lapses at the private sector lender, sources told CNBC-TV18 that “the ministry’s preliminary investigation points to possible violations of corporate governance norms and provisions under the Companies Act.”Further, based on the initial findings, “The MCA is now evaluating whether to escalate the matter to its Directorate General of Investigations or assign the case to the Serious Fraud Investigation Office (SFIO), signalling potentially graver implications,” sources added.The bank has not received any communication from the MCA in this regard.
This development adds to a growing web of regulatory scrutiny surrounding the bank, which has been under the scanner of multiple authorities—including the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Institute of Chartered Accountants of India (ICAI)—after it disclosed significant financial misstatements earlier this year. IndusInd Bank shares closed at ₹783.95 on the NSE as of 3:30 PM on August 1The Flashpoint: A Multi-Crore Disclosure LapseThe chain of events began in March 2025, when IndusInd Bank stunned investors by revealing accounting discrepancies related to its internal foreign exchange derivative contracts. The bank admitted that these lapses—some dating back several years—had gone undetected due to weak internal controls. As a result, the bank was forced to revise its financials, slashing its net worth by ₹1,979 crore, roughly 2.27% of its net assets as of December 2024.The announcement triggered an immediate market rout. Shares of IndusInd Bank plummeted nearly 27% intraday, wiping off billions in market capitalisation. While the RBI assured that the bank remained solvent, it flagged “serious weaknesses in governance and risk oversight.”More Lapses Emerge: Microfinance MisreportingJust weeks after the derivative-related disclosure, another ₹674 crore discrepancy surfaced in the bank’s microfinance operations. In May 2025, IndusInd admitted to wrongly booking ₹595 crore under “other assets” and an additional ₹79 crore as interest income. These figures, which lacked proper backing, were reversed in Q4 FY25.Together, the twin accounting lapses have raised troubling questions about the integrity of IndusInd’s internal audit systems, board oversight, and top-level accountability.Multiple Investigations UnderwaySEBI: Insider Trading Red Flags
The SEBI is probing allegations that senior executives, including former MD and CEO Sumant Kathpalia and Deputy CEO Arun Khurana, traded in the bank’s shares before the derivative lapses were made public. A forensic audit by Grant Thornton reportedly found that the two had sold equity worth crores while aware of the discrepancies—an alleged violation of insider trading norms.Both executives stepped down in April 2025 following the revelations. SEBI has barred them from accessing the securities market pending further investigation.RBI: Governance WeaknessesThe RBI, in its internal communications and interactions with the bank’s board, is said to have highlighted “deep-rooted control lapses” and emphasised the need for a complete overhaul of compliance protocols. While the RBI has stopped short of penal action so far, sources say the central bank is closely monitoring management restructuring and is likely to flag the case during its next supervisory cycle.ICAI: Forensic Audit on Auditors’ RoleThe Institute of Chartered Accountants of India (ICAI) has independently initiated a suo motu review of the bank’s audited accounts for FY23 and FY24. ICAI is specifically assessing whether statutory auditors failed in their duty to detect or report material misstatements. The probe could result in disciplinary action against the audit firm involved. ICAI recently stated that the institute is treating this as a priority case that may require action under the Chartered Accountants Act.NFRA: Complaint FiledThe National Financial Reporting Authority (NFRA) has received formal complaints about possible audit failures in the case and is gathering inputs from the RBI before deciding on whether to launch an independent audit oversight review.What MCA’s Involvement MeansWhile the RBI and SEBI focus on operational and securities law violations, the MCA’s entry brings the focus squarely on corporate governance, board accountability, and adherence to the Companies Act. The ministry’s preliminary findings have revealed signs of deeper systemic violations, sources said. These include:
Lack of board oversight in detecting misstatements
Improper recording of financial transactions
Potential suppression of material information from regulators and investors
If the MCA assigns the case to the SFIO, it could pave the way for criminal prosecution and attach penalties against directors and key managerial personnel, especially if willful misconduct is established, say experts.Bigger Questions for India IncIndusInd Bank’s crisis—unfolding in multiple layers—has become a test case for corporate accountability in India’s financial system. It has triggered renewed calls for stricter auditor oversight, improved whistleblower mechanisms, and tighter disclosure norms in the banking sector.Experts say the incident underscores a wider structural gap. “This isn’t just about IndusInd. It’s a red flag for every Indian bank that heavily relies on opaque financial instruments and poor board diligence,” said a senior regulatory official, requesting anonymity.
