Indus Ind Bank - Fraud

 

IndusInd Bank is currently facing multiple probes and allegations related to accounting fraud, internal control failures, and earlier evergreening‑type practices in its microfinance business. The situation is evolving, with the Serious Fraud Investigation Office (SFIO), RBI-linked processes, and internal/external audits all involved.

Key fraud / lapse buckets

• Derivatives & treasury accounting hole

  • Internal derivative trades were allegedly mis‑accounted, creating a ₹1,960 crore “hole” in the derivatives book, now under formal SFIO investigation under Section 212 of the Companies Act.business-standard+2​

  • Whistleblower and former CFO Gobind Jain has told the Economic Offences Wing that such lapses go back to around 2015, with senior management and ex‑finance chief allegedly aware, and that bank net worth may have been overstated.economictimes​

• Microfinance income fraud (fee + interest)

  • An internal audit in May 2025 found that about ₹172.58–₹173 crore had been wrongly recorded as fee income in the microfinance business over three quarters ending December 2024, which was later reversed in FY25 accounts.economictimes+1​

  • The same reviews identified wrongly booked microfinance interest income of about ₹674 crore and “unsubstantiated balances” of ₹595 crore in “other assets”, taking the total impact of discrepancies (derivatives + MFI interest/fee + other assets/liabilities) to around ₹1,960–₹2,600 crore depending on the estimate.caalley+1​

Suspected involvement and management fallout

• Alleged role of senior employees

  • The bank has disclosed that certain employees involved in financial reporting and accounting may have participated in or enabled the fraud by overriding internal controls and concealing mis‑accounting from the board and auditors.economictimes+1​

  • Joint statutory auditors have filed a formal fraud report with the central government, triggering deeper regulatory scrutiny, including SFIO’s investigation.moneycontrol+1​

• Top management resignations

  • MD & CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned around April 2025, taking “moral responsibility” amid the derivatives and accounting controversy.economictimes+1​

  • Earlier CFO‑level whistleblowing included repeated written requests to appoint an external auditor to probe treasury and derivatives accounting, which were initially not acted upon.economictimes​

Regulatory and investigative actions

• SFIO and other probes

  • SFIO has issued formal investigation letters (December 2025) to IndusInd Bank, seeking extensive information on internal derivatives, microfinance income recognition and “other assets/liabilities” entries.scanx+2​

  • Grant Thornton and EY have reportedly been engaged for forensic‑style audits, especially on treasury and microfinance/unsecured loan portfolios, including scrutiny of about ₹7,000 crore of microfinance and unsecured loans.angelone+1​

• RBI and Companies Act framework

  • The bank has acknowledged that the issues are being dealt with under RBI’s Master Directions on Fraud Risk Management and under the Companies Act provisions invoked by SFIO.timesofindia.indiatimes+1​

  • The board states that corrections for identified discrepancies have been incorporated in FY25 financials and that steps are being taken to strengthen controls and fix accountability.caalley+1​

Earlier evergreening / MFI consent issues (2021)

• Allegations around Bharat Financial Inclusion (BFIL)

  • In 2021, whistleblowers alleged large‑scale evergreening in about 80,000–84,000 microfinance accounts at subsidiary BFIL by issuing new loans to repay overdue ones within the same household.imifinanceclub.wordpress+1​

  • The bank denied evergreening but admitted that around 84,000 loans had indeed been disbursed without proper recorded customer consent due to a “technical glitch”, of which about 26,000 accounts with roughly ₹34 crore outstanding remained active.indusind+1​

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