IndusInd Bank SFIO probe: ₹1,000 cr trades, FY25

What SFIO is probing at IndusInd Bank

The Serious Fraud Investigation Office (SFIO) is investigating alleged accounting irregularities at IndusInd Bank, after the Ministry of Corporate Affairs (MCA) ordered a probe citing public interest and serious discrepancies flagged by statutory auditors and forensic reports. People familiar with the investigation said the probe is currently focused on two specific strands. One is a set of internal treasury transactions worth about ₹1,000 crore that have been described as unverified internal treasury trades. The second involves accounting entries in the bank’s microfinance unit, Bharat Financial Inclusion Limited (BFIL), where authorities are examining whether entries indicate possible evergreening of loans to the extent of about ₹2,000 crore.

IndusInd Bank has said earlier that it had reported certain matters to SFIO under MCA. Those disclosures covered internal derivative trades and other accounting entries, including microfinance interest and fee income. The SFIO probe is being pursued under Section 212 of the Companies Act, 2013, which allows the central government to assign complex cases to the agency.

Treasury trades: ₹1,000 crore under scrutiny

Sources cited in the reporting said the internal treasury trades under review could have resulted in monetary gains for the people involved in ratifying and executing the trades. The key question for investigators is whether these trades were carried out with proper authorisation. One account of the investigation said the scrutiny began with irregularities of about ₹250 crore and later expanded to about ₹1,000 crore as the probe deepened.

Investigators are specifically examining whether bank officials took necessary approvals to authorise these transactions. Sources also indicated that the amount under scrutiny could rise further when the probe concludes. IndusInd Bank had previously disclosed that issues related to accounting of internal derivative trades, along with other items, were reported to SFIO.

BFIL accounting entries and alleged evergreening concerns

A second major thread is the investigation into BFIL’s books. Sources said this was not part of the original SFIO mandate but was later included as the probe widened. Authorities are questioning certain past and present employees and BFIL’s statutory auditor on the validity of an accounting entry tied to about ₹2,000 crore of loans.

Investigators are looking at whether the entry was made to downplay loan losses in the microfinance business, especially in FY25, and whether the underlying loans should have been treated as non-performing assets (NPAs). A former CFO’s disclosure to SFIO is also described as an inflection point in the inquiry. Sources said the former CFO told investigators that one reason for quitting on January 17, 2025 was pressure from the then board and management to sign IndusInd Bank’s consolidated financials, which were drawn up based on a comfort letter from BFIL’s auditors.

How the wider derivatives issue surfaced

The broader accounting issues trace back to March 2025, when the lender disclosed discrepancies in derivatives transactions spanning five to seven years. Following multiple audits, the bank recognised nearly ₹2,000 crore in one-time losses in its March 2025 quarter results. Reporting also cited an external auditor observation of a cumulative adverse impact on profit and loss of ₹1,959.98 crore as of March 31, 2025 due to discrepancies in the derivatives portfolio.

On April 15, 2025, the bank disclosed that another external agency estimated a negative impact of ₹1,979 crore on net worth from derivative accounting lapses. The bank assessed a post-tax adverse impact of 2.27% on net worth as of December 2024 due to derivative-related discrepancies, and also referred to an impact estimate of about 2.35% of net worth.

SFIO summons broadened to auditors and former executives

SFIO has summoned erstwhile key managerial personnel as part of the investigation, including former CEO Sumant Kathpalia, former CFO Gobind Jain and former deputy CEO Arun Khurana. Separate reporting also said SFIO questioned former CEO Romesh Sobti and former treasury head Siddharth Banerjee.

As the probe widened, SFIO asked major audit firms associated with the bank over the past decade to join the investigation. The firms cited were S R Batliboi & Co (EY network), Haribhakti & Co, M P Chitale & Co, and MSKA & Associates (BDO network). The agency is examining observations and findings recorded in ADT-4 forms, forensic monitoring reports, forensic audit reports, and internal and inspection audit reports.

What ADT-4 and Section 447 mean in this context

Form ADT-4 is a statutory report that auditors file with the central government to flag suspected fraud of at least ₹1 crore committed by company executives or employees. SFIO’s mandate, as described in the reporting, includes examining alleged manipulation of books, creation of fictitious accounts, misclassification of assets, and the overall impact on the bank’s financials.

Investigators are also examining whether any conduct constitutes fraud under Section 447 of the Companies Act. The probe scope includes transactions relating to assets and liabilities, related-party transactions, loans and advances, investments, and identifying any diversion or routing of funds and potential beneficiaries, if any.

Parallel track: Mumbai Police EOW sees no fund diversion

In a parallel development, Mumbai Police’s Economic Offences Wing (EOW), which had been conducting a preliminary inquiry, reported that it did not find evidence of fund siphoning or diversion in its initial assessment. A government official cited in reporting said the absence of clear fund diversion could point to lapses in reporting, classification, or internal controls rather than outright fraud, while noting SFIO is examining accountability and whether the discrepancies amount to fraud under the Companies Act.

This split between an accounting-focused inquiry and a fund-movement check is important for investors. It clarifies that multiple agencies can look at different aspects of the same episode: accounting treatment and governance on one side, and potential diversion on the other.

Key figures and disclosures at a glance

Timeline of the investigation and disclosures

Market and governance implications to watch

The reported accounting issues span derivatives accounting, balances under “other assets” and “other liabilities”, and microfinance income recognition, along with questions on loan classification at BFIL. The reporting also said SEBI is investigating former senior bank officials, including ex-CEO Sumant Kathpalia, for alleged insider trading linked to share sales before the discrepancies became public.

For shareholders, the immediate relevance is that SFIO is examining both the mechanics of disputed transactions and the governance process that allowed them, including approvals, audit oversight, and documentation. The bank has said it has not received any recent communication from SFIO directly regarding summons, and that SFIO has been issuing summons to individuals without routing them through the bank.

Conclusion

SFIO’s IndusInd Bank probe has moved from broad concerns around derivatives accounting into specific lines of inquiry: internal treasury trades worth about ₹1,000 crore and BFIL loan-related entries tied to about ₹2,000 crore. The agency is also drawing in former top executives and multiple audit firms as it reviews filings, forensic reports, and internal audits. Sources indicated SFIO is expected to submit a preliminary report to MCA by the end of May or early June, which should clarify the next steps and the scope of any further action.