IndusInd Bank Fraud: IndusInd Bank Faces Internal Shakeup Amid Suspected Employee-Involved Fraud and Accounting Lapses

IndusInd Bank Fraud: IndusInd Bank uncovers suspected fraud involving employees in accounting and financial reporting. PwC audit reveals ₹1,979 crore hit; top executives resign amid investigation.

New Delhi, May 21, 2025 — In a significant development that has sent ripples through India’s banking sector, IndusInd Bank has revealed suspected fraud involving certain employees, following the findings of internal audits and external assessments. The irregularities reportedly span across its derivatives segment, microfinance portfolio, and overall financial reporting, prompting the bank to notify regulatory and investigative agencies.

The bank’s Board of Directors, after reviewing reports from both its Internal Audit Department (IAD) and external auditors from PricewaterhouseCoopers (PwC), has concluded that some employees with significant responsibilities in accounting and financial reporting may be involved in fraudulent activities.

“Based on the review of internal audit reports and an external professional firm, the Board suspects the occurrence of fraud against the Bank and the involvement of certain employees,” the bank stated in its regulatory filing.

Key Financial Discrepancies Uncovered

During its assessment, the Board identified serious discrepancies in multiple areas of the bank’s operations:

• Derivatives Portfolio: Earlier in March, IndusInd Bank disclosed accounting lapses in its derivative transactions, initially projected to affect about 2.35% of its net worth as of December 2024.
• PwC Report Findings: Following this, PwC was brought in to assess the full impact. Their investigation quantified a total negative impact of ₹1,979 crore on the bank’s balance sheet as of June 30, 2024.
• Unsubstantiated Balances: The IAD discovered unsubstantiated balances worth ₹595 crore in the “Other Assets” category of the bank’s balance sheet.
• Microfinance Interest Misreporting: A sum of ₹674 crore was found to be incorrectly recorded as interest income across three quarters of FY24-25.

Leadership Shakeup at the Top

In the wake of the findings, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned on April 29, 2025. This sudden leadership change has led the Board to form a Committee of Executives to oversee operations until a new MD & CEO is appointed, or for a period of three months, whichever is earlier.

Regulatory and Legal Action Underway

The Board has instructed the management to take all necessary steps under the applicable laws, including reporting to regulatory bodies like the RBI, and initiating investigations by enforcement agencies.

“The Bank has appropriately accounted for and reflected the impact of all discrepancies identified in these reports while finalising the financial results for the quarter and year ended March 31, 2025,” the filing added.

Market and Investor Implications

The revelations have raised concerns among investors and analysts, especially given the scale of the discrepancies and the seniority of the employees potentially involved. Market analysts warn that such lapses could affect the bank’s credibility, investor sentiment, and possibly trigger stricter oversight from the Reserve Bank of India (RBI).

What’s Next for IndusInd Bank?

The coming weeks will be crucial as the bank:

• Works with agencies to identify and hold accountable those responsible.
• Begins the search for new leadership at the helm.
• Undertakes a deeper forensic audit, if required, to uncover the root of systemic failures.

Despite the turbulence, IndusInd Bank reiterated its commitment to transparency and governance.