IndusInd Accounting Probe: Mumbai Police finds no criminality by ex-execs
Nov 12, 2025
Synopsis
In a recent announcement, the Mumbai Police Economic Offences Wing has concluded its investigation into the accounting discrepancies at IndusInd Bank, reporting a lack of evidence for any fund misappropriation. Consequently, no criminal charges will be filed against former high-ranking officials.
The Mumbai Police Economic Offences Wing (EOW) hasn't found any evidence of fund siphoning or diversion in its probe into the alleged accounting irregularities at IndusInd Bank, effectively ruling out criminality on the part of the lender's former top executives, according to people familiar with the investigation.
Sources said the preliminary enquiry (PE) conducted by the EOW has so far found no basis to register a first information report (FIR). However, before formally closing the case, the agency has written to the Reserve Bank of India (RBI) seeking clarification on certain aspects of the matter, including whether similar concerns were earlier brought to the regulator's notice and if any follow-up action was taken.
"So far, the investigation has revealed no instance of fund siphoning. Regarding the accounting of ₹1,950 crore, there appear to have been omissions but not wilful ones," a senior police official told ET. "A later finding by the forensic auditor of a ₹255-crore mismatch was also examined thoroughly, but no evidence was found to suggest deliberate manipulation. Hence, there is no ground to register a criminal case."
The EOW's communication to the RBI also seeks clarity on hedging practices and accounting norms related to the alleged mismatches, the official added.
The RBI didn't respond to ET's queries.
A PE is converted into an FIR only if there is evidence suggesting a cognizable offence. Otherwise, the case is closed for lack of proof. "Once the RBI's reply is received, the bank will be informed of the outcome," the official said.
Irregularities date back to 2015
Investigators have found that the accounting mismatches date back to 2015, and while some erstwhile key managerial personnel (KMPs) were aware of them, there was no indication that they profited from the discrepancies or engaged in insider trading.
"The complainant had also alleged possible insider trading, but this aspect falls under the purview of Sebi (Securities and Exchange Board of India). The police found that the shares sold by the executives were part of their ESOPs, and no irregular positions were taken," another official said.
In March, the Hinduja Group-promoted lender disclosed a ₹1,979-crore lapse in its derivatives portfolio, along with additional misstatements of ₹674 crore booked as microfinance income, ₹595 crore in "unsubstantiated balances" under other assets, and ₹172.6 crore misclassified as fee income.
The bank had said that an internal review of its derivative-related accounts indicated a potential 2.35% impact on its net worth as of December 2024, while stressing that its profitability and capital adequacy remained strong enough to absorb the one-time adjustment.
Following the RBI's insistence on a deeper review, PwC was tasked with examining derivative transactions between April 2023 and June 2024, while Grant Thornton conducted a wider forensic audit covering FY2016 to FY2024.
Grant Thornton's report, submitted recently, named around 25 individuals linked to the lapses, according to people aware of the findings.
The alleged irregularities stemmed from unhedged yen contracts, where internal trades between IndusInd's dollar and yen desks were booked on an accrual basis while external trades were marked to market-a mismatch that inflated profits in earlier years and deferred losses, resulting in a cumulative shortfall of nearly ₹2,000 crore.
The EOW began its preliminary inquiry in August after IndusInd filed a complaint flagging suspected accounting lapses, some dating as far back as 2015. Among those questioned were former CEO Sumant Kathpalia, ex-CFO Govind Jain, and former deputy CEO Arun Khurana, besides more than a dozen suspended employees from the bank's finance and accounts divisions.
[The Economic Times]
