IndusInd Bank Under SFIO Probe: What Triggered The Investigation

The Ministry of Corporate Affairs has directed the Serious Fraud Investigation Office to probe the affairs of IndusInd Bank Ltd., citing public interest and serious accounting irregularities flagged by statutory auditors and forensic reports, as per an Economic Times report.

The decision comes even as the Mumbai Police’s Economic Offences Wing is set to close its preliminary enquiry after finding no evidence of fund siphoning or diversion, said the report citing sources.

In its order, the Central government referred to multiple ADT-4 filings submitted under Section 143(12) of the Companies Act, 2013 by the bank’s statutory auditors. One such ADT-4, dated May 12, 2025, highlighted accounting discrepancies amounting to around Rs 1,959.78 crore spanning FY2015-16 to FY2023-24.

The government noted that the reports pointed to accounting errors requiring corrective action as well as weaknesses in internal control systems. It also considered forensic monitoring reports (FMRs) submitted by the bank to the Reserve Bank of India (RBI) and the SFIO, as per the report.

“Based on the ADT-4 filings and the forensic monitoring reports submitted to the RBI and SFIO, the Central Government has formed the opinion that an investigation into the affairs of the company is necessary in the public interest,” a source said as per the report.

IndusInd Bank was not immediately available for comment, the report stated.

The SFIO has been tasked with examining observations and findings contained in the ADT-4 forms, forensic monitoring reports, forensic audit reports, internal audit and inspection reports, as well as inputs from other agencies under the Companies Act.

The probe will also scrutinise alleged manipulation of books of account, creation of fictitious accounts, misclassification or conversion of assets, and the overall impact on the bank’s financial statements. Transactions relating to assets and liabilities, related-party transactions, loans and advances, and investments will come under review. The agency has been mandated to identify any diversion or routing of funds and the beneficiaries, if any.

Separately, the Mumbai EOW said its preliminary enquiry, initiated in August, has not found evidence of fund siphoning or diversion and does not merit registration of an FIR. Before formally closing the case, the agency has sought clarifications from the RBI on whether the regulator was previously aware of the issues, as well as on accounting and hedging practices.

In March, the Hinduja Group-promoted lender disclosed lapses amounting to Rs 1,979 crore in its derivatives portfolio. It also reported misstatements including Rs 674 crore recorded as microfinance income, Rs 595 crore reflected as unsubstantiated balances under other assets, and Rs 172.6 crore misclassified as fee income.

The bank said these issues could have an impact of 2.35% on its net worth as of December 2024, but maintained that its capital position and profitability were sufficient to absorb the one-time impact.

Following RBI directions, PwC reviewed derivative transactions undertaken between April 2023 and June 2024, while Grant Thornton conducted a forensic audit covering FY2016 to FY2024. The Grant Thornton report is understood to have identified around 25 individuals linked to the lapses.

The EOW enquiry was initiated after the bank itself disclosed the issues. Former CEO Sumant Kathpalia, former CFO Govind Jain, former deputy CEO Arun Khurana and several suspended finance staff were questioned as part of the probe.