SEBI prohibits ex-IndusInd CEO and four others from securities market for insider trading

The Securities and Exchange Board of India (SEBI) has taken a decisive step by prohibiting the former CEO of IndusInd Bank, Sumant Kathpalia, and four other top officials from participating in the securities markets due to suspected insider trading activities involving the bank’s shares. A cumulative amount of Rs 19.78 crore has been confiscated from these individuals as a result of an interim order issued by the regulatory body.

Alongside Sumant Kathpalia, the other executives from IndusInd Bank who have been barred from engaging in the securities market by SEBI are Arun Khurana, who previously served as the executive director and deputy CEO, Sushant Sourav, the head of treasury operations, Rohan Jathanna, the head of GMG operations, and Anil Marco Rao, the chief administrative officer (CAO) for consumer banking operations. These high-ranking officials stand accused of insider trading violations related to trading IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI) regarding discrepancies in the bank’s derivative portfolio.

In its 32-page order, SEBI remarked that the evidence collected during the preliminary investigation suggests that these individuals were aware of the UPSI related to the discrepancies in the derivative portfolio and traded the bank’s shares to circumvent substantial losses. The regulatory authority highlighted that the case originated from a directive issued by the Reserve Bank of India (RBI) that had a noticeable operational and financial impact on IndusInd Bank.

Internal communications within the bank revealed that the discrepancies in the derivative portfolio were being closely monitored, with estimated impacts communicated through emails amongst the employees. While the official disclosure of the figures regarding the discrepancies in the derivative portfolio was only made in March 2025, certain emails exchanged within the bank highlighted a significant negative financial impact due to these discrepancies as early as November 2023.

SEBI noted that notices and emails among senior management at IndusInd Bank indicated that they were well aware of the UPSI related to the discrepancies and were keeping a close watch on the situation. The figures related to these discrepancies were being internally tracked and, subsequently, prepared for submission to the RBI for review.

Furthermore, SEBI pointed out that the internal oversight in establishing the financial impact of the discrepancies was critical, as KPMG was hired to independently validate the figures derived internally. The preliminary investigation revealed that KPMG had estimated a substantial negative financial impact from the discrepancies until December 2023.

The regulatory authority imposed a trading restriction on the five officials involved in the insider trading activities, preventing them from engaging in any securities deals until further orders are issued. In light of these developments, the former CEO and deputy CEO of IndusInd Bank resigned in April, prompting the appointment of a Committee of Executives to oversee daily operations until new top leadership is appointed or for a three-month period, whichever comes first.

The financial turmoil faced by IndusInd Bank, as evident from its reported loss of Rs 2,329 crore for the March quarter, was attributed to various irregularities and incorrect accounting practices that were brought to light. A deep-clean exercise was conducted to rectify the impact of these accounting discrepancies, with the bank taking significant hits in various financial aspects like derivative trades, interest income reversal, and fraudulent classifications of funds.

Moving forward, IndusInd Bank’s internal audit report highlighted the involvement of senior bank officials in compromising key internal controls, which prompted the bank to report potential senior management involvement in the accounting fraud to the Central Government. This marks a significant milestone in the ongoing efforts to address the financial discrepancies and organizational mismanagement that have plagued the bank in recent times.