What Is Causing Turmoil for IndusInd Bank's Stock After SEBI Ban?

Mumbai, May 29 (NationPress) - The stock of IndusInd Bank has seen a significant drop of 11 percent since March 10, when the bank revealed concerns over suspected fraud and allegations of insider trading.

On March 10, the then Chief Executive Officer Sumant Kathpalia stated during a call with analysts that these derivative transactions occurred up to five to seven years prior and were uncovered during a portfolio review following the RBI's accounting framework, identified in September and October 2024.

In response, the bank initiated an internal investigation and promptly notified the regulator. An external agency was also engaged to corroborate its internal findings.

As of Thursday, the bank’s shares were valued at Rs 813.95 each, reflecting an increase of Rs 8.80 or 1.09 percent.

In a recent update, the Securities and Exchange Board of India (SEBI) has prohibited Kathpalia and four additional individuals from participating in the stock market. SEBI indicated that these individuals were privy to unpublished price-sensitive information regarding the bank's derivative transactions.

Among those named in the order are Arun Khurana, former executive director and deputy CEO, along with Sushant Sourav, head of treasury operations, Rohan Jathanna, head of GMG operations, and Anil Marco Rao, chief administrative officer of consumer banking operations.

The affected individuals are barred from buying, selling, or engaging with securities, directly or indirectly, until further notice, as per SEBI's interim ruling.

Last week, Ashok P. Hinduja, Chairman of IndusInd International Holdings Limited (IIHL), the bank's promoter, sought to mitigate the fallout from the fraud announcement, which has resulted in a staggering Rs 2,236 crore loss for the January-March quarter.

“While the bank's capital adequacy remains robust, IIHL is committed to supporting the bank's growth, should additional equity be required, as it has for the past 30 years,” Hinduja stated.

The RBI has commenced investigations into the accounting irregularities at IndusInd Bank.

The bank's Board has raised suspicions of fraud involving certain employees who significantly impacted the bank's accounting and financial reporting, and has mandated actions in accordance with applicable laws, including reporting to regulatory bodies and investigative agencies.

On May 20, an internal audit revealed that Rs 172.58 crore had been inaccurately recorded as fee income in the Microfinance (MFI) sector across three quarters ending in December, which has since been corrected in the fourth quarter of FY25.

This revelation followed the abrupt termination of IndusInd Bank's CEO last month, after significant irregularities were found in its foreign exchange derivatives and microfinance portfolio.