Markets watchdog Sebi on Wednesday barred former IndusInd Bank CEO Sumant Kathpalia and four other high-ranking executives from accessing the securities markets in connection with suspected insider trading in the bank’s shares. According to the regulator’s interim ruling, Sebi has confiscated a total of Rs 19.78 crore from the five persons in addition to the market ban.
Arun Khurana, Executive Director and Deputy CEO at the time of the alleged violation; Sushant Sourav, Head of Treasury Operations; Rohan Jathanna, Head of GMG Operations; and Anil Marco Rao, Chief Administrative Officer (CAO), Consumer Banking Operations, are the other IndusInd Bank Ltd. (IBL) officials that Sebi has placed under arrest.
These top executives reportedly traded IndusInd Bank shares while in receipt of undisclosed price-sensitive information (UPSI) related to discrepancies in the account balances of the bank’s derivative portfolio. By doing this, they violated the laws prohibiting insider trading.
“During the preliminary examination conducted by Sebi, on the basis of the evidence collected so far, it is prima facie seen that all noticees traded in the scrip being aware of the UPSI related to the discrepancies and averted/avoided huge losses,” the regulator said in its 32-page ruling.
The lawsuit began with a Master Direction from the Reserve Bank of India (RBI) that significantly impacted the financial and operational aspects of IndusInd Bank.
Sebi noted that the bank’s internal staff was aware of the financial consequences arising from variations in the derivative portfolio and had already begun analyzing the effect internally.
A preliminary examination reveals that on November 30, 2023, the bank’s Head of Accounts emailed certain employees. This statement said that the projected effect of the derivative portfolio’s differences was Rs 1,749.98 crore.
Furthermore, it seems from the early analysis that IBL’s top management and noticees (five officials) were aware of the UPSI’s inconsistencies and had been continuously monitoring it.
Noticees participated in insider trading in IBL shares, according to Sebi’s review of the evidence from the preliminary investigation.
According to Sebi, emails sent on December 6, 7, and 8, 2023, indicated a difference of almost Rs 1,362 crore. Some workers were notified of the final amount of Rs 1,572 crore on December 11, 2023.
The study also revealed that, in addition to being tracked internally, figures related to the inequalities were being prepared for submission to the RBI.
Emails issued on December 16, 2023, March 6, 2024, and May 5, 2024, revealed that the disparity statistics for the quarters ending in September 2023, December 2023, and March 2024 were Rs 1,572 crore, Rs 1,776.49 crore, and Rs 2,361.69 crore, respectively.
Sebi noted that only on March 10, 2025, was this information released to the public via stock exchange filings.
Senior management’s insistence on external verification of these statistics was also evident. KPMG was so hired in January 2024 to examine the disparities that the internal team had discovered. According to preliminary analysis, KPMG reported negative effect from anomalies of Rs. 2,093 crore for data as of December 31, 2023.
They are “prohibited from purchasing, selling, or trading securities directly or indirectly till further orders” since Sebi sold IBL scrips in its notification Nos. 1 through 5 (five officials).
Both CEO Kathpalia and Deputy CEO Khurana left the bank on April 29. Following their departure, an Executive Committee will be appointed by the IndusInd Bank Board to oversee daily operations until the new MD and CEO assume leadership or for a period of three months, whichever comes first.
The fraud-plagued private sector lender said earlier this month that it had lost Rs 2,329 crore in the March quarter, which was its worst performance to date. The interim management chose not to do a thorough clean-up and recognize the consequences of flawed accounting processes.
The bank addressed all of the issues that were brought to their attention in the March quarter, including a loss of Rs 1,000 crore as a result of misclassifying derivative deals. Interest income of 1960 crore was reversed. 674 crore as a result of Rs. 172 crore in fraud and miscalculation. Workers mislabeled it as fee money from the microfinance company. Previously, the sums were listed under “other assets” and “other liabilities.” This prevented Rs. 595 crore from being entered incorrectly, and other delays have been found.
The “involvement of senior bank officials, including former key management personnel (KMPs), in circumventing key internal controls” was disclosed in the bank’s internal audit report. The central government has been informed by the bank that high management could be complicit in the scam.