Forensic review found IndusInd Bank executives traded shares before accounting disclosure, document shows

New Delhi/Mumbai: A forensic review by audit and advisory firm Grant Thornton found two executives of IndusInd Bank traded in its shares while they were aware of accounting lapses at the bank but before those were made public, a document reviewed by Reuters showed.

India's fifth-largest private sector bank disclosed in March that years of incorrect accounting of internal derivative trades have led to a $230 million hole in its $60.8 billion balance sheet. Its CEO Sumant Kathpalia and deputy Arun Khurana stepped down last month.

Kathpalia said in his resignation letter he was taking "moral responsibility", while Khurana resigned citing "unfortunate developments". Neither explicitly admitted or denied any wrongdoing.

Grant Thornton, which the bank hired to conduct an independent forensic investigation, found as a result of its review of internal accounts and communications that there were indications Kathpalia and Khurana traded in shares of IndusInd "during a period of seeming non-disclosure," a summary of the findings showed.

"Considering that employees had knowledge of incorrect accounting and/or its impact but traded in shares of IBL during the period may also require a determination from an insider trading perspective," the summary said.

Kathpalia and Khurana did not respond to repeated calls and text messages requesting comment. The document did not name any other executives in the context of share trading, but it mentioned one other executive's handling of the information about the accounting lapses.

India's markets regulator SEBI, IndusInd Bank and Grant Thornton also did not respond to requests for comment.

The summary of Grant Thornton's findings did not disclose further details of the share trading or offer any conclusions about its nature.

A Reuters review of employee trading data provided by India's National Stock Exchange showed that between March 2024 and IndusInd Bank's March 10, 2025 disclosure, then CEO Kathpalia sold the bank's shares worth 283.48 million rupees ($3.3 million) and bought 102.71 million rupees' worth of shares. His then deputy, Khurana, sold 320.72 million Indian rupees worth of IndusInd Bank shares during that period.

The summary document also noted "less than adequate" emphasis on "accounting analysis and rigour", has not been made public.

Two people familiar with the matter said Grant Thornton has shared the report with the bank and the Reserve Bank of India, which oversees the banking industry.

IndusInd Bank said in March that following an internal review it expected a 2.35 per cent hit to its net worth because of internal derivatives trades that did not comply with central bank rules.

Reuters reported later that month that it hired Grant Thornton to investigate the accounting lapses and the bank itself said in an April 27 filing that a report by "independent professional firm" had identified "incorrect accounting" and it was "taking necessary steps to fix accountability."

The summary of Grant Thornton's findings said many finance and treasury executives at the bank were aware of the accounting issues and the Market Risk team flagged its concerns way back in May 2015.

"We also note other emails and communications that indicate suggestions to delete pertinent communications as well as suppressing sharing of information on this aspect," the document said, without naming any individuals in that context.

Problems at the bank were amplified by "relatively manual accounting and computations", missing or inadequate supporting documentation and inadequate standard operating procedures, it said.

IndusInd Bank shares, which tumbled after the March 10 disclosure, are now down 8 per cent following the central bank's assurances that the lender was well capitalised and its financial position remained satisfactory.

The central bank has also approved the establishment of a committee of executives to oversee its operations in the absence of a new CEO.