The IndusInd Files Part 1: A Whistleblower, Four Resignations And A Scandal

Whistleblowers at banks are not new. Bank chiefs have either lost their jobs, faced considerable professional censure or even legal proceedings owing to disclosures made by those who choose to break ranks and lodge complaints against misdeeds.

The story at IndusInd Bank is no different. According to two people with direct knowledge of the matter, the bank's former Chief Financial Officer Gobind Jain has now submitted evidence of serious wrongdoings of the lender over many years.

The two people quoted above include a person directly involved with the investigation and a second person with direct knowledge of the investigation. NDTV Profit has also reviewed a part of these documents.

These include mail trails, accounting documents and personal correspondence between Jain and IndusInd Bank's previous management team over months.

According to the first person quoted above, who is directly involved with the investigation, the former CFO has pointed fingers at senior board functionaries and members of the management as being complicit in hiding information from regulators and other stakeholders.

In his submissions Jain has alleged that the bank's senior management team has been carrying forward serious accounting gaps for years, with the board of directors also in the know. He has also alleged that he was made to rewrite his resignation, which he had submitted four times over 2024, to hide crucial evidence of improper accounting.

In this two part series of stories, NDTV Profit will tell its readers about the nature of underhanded dealings at the bank. Queries mailed to the bank and its promoters the Hinduja Group remain unanswered.

On Jan. 18, IndusInd Bank informed exchanges about the resignation letter by its then Chief Financial Officer Gobind Jain, which was received by the bank a day prior. The exchange notification stated that Jain would step down from his role on Jan. 20, though he would serve his 90 day notice period.

The letter stated that Jain wanted to "pursue opportunities outside the bank or within the promoter group after having put in close to 3.25 years." He also said that he wanted to travel to the United States for his daughter's examination and admission process, seeking to be relieved "ASAP".

In about two months though, on March 10, the world came crashing down on the bank. Then MD & CEO Sumant Kathpalia and Deputy CEO Arun Khurana held a conference call with analysts, to explain a recent disclosure by the lender where "discrepancies" in the derivatives accounting portfolio were detected.

During the call, analysts did point to the fact that the CFO had quit only two months ago. When asked if the two events had anything to do with each other, Kathpalia said they were not linked.

"He was aware of this transaction, and if you see the resignation, it is in public domain. I don't think it is linked to only this transaction. He had a different reason on why he was leaving and we were fine with it," the then MD & CEO had said on the conference call.

In quick succession, Kathpalia and Khurana quit the bank in September, as independent investigations were being conducted by PwC and then Grant Thornton Bharat. Soon after it was revealed that along with nearly Rs 2,100 crore worth accounting gaps in the derivatives accounting, the bank had also identified gaps in the microfinance book worth Rs 2,800 crore.

Over the course of the week starting Sept. 22, the Economic Offences Wing of the Mumbai police has questioned nearly 13 people in connection with the case, the two people quoted above said. These included former office holders like Kathpalia, Khurana, Jain and some existing employees of the bank.

According to the second person, Jain was called twice during the week, where he answered questions for about three hours cumulatively. In his submissions, Jain highlighted that he had been trying to quit the bank for nearly a year, as the management had failed to initiate an independent audit into the accounting discrepancies.

Jain had submitted resignation letters at least four times over 2024, starting from June. In his resignation letters, marked to Kathpalia and the bank's human resources chief Zubin Mody, the former CFO highlighted the "incorrect procedures and practices by treasury". The treasury department reported to Khurana at the time.

Jain had kept his resignations on hold after assurances from Kathpalia of a free and fair investigation. In his resignation letter on Sept. 29, the former CFO pointed out that despite repeated requests Kathpalia had not started an independent audit.

The lack of an audit was creating a "seemingly untenable and risky position" Jain said in his letter.

In front of the EOW investigators, the former CFO then alleged that he was called by Mody to Hinduja House in Worli, Mumbai. There he was made to write an entirely new resignation letter, which was released to the exchanges on Jan. 18.

Jain has also submitted proof of a handwritten note, allegedly dictated by Mody, before the formal resignation was sent. This note formed the basis of the final resignation letter, Jain has alleged.

To be sure, these are allegations by Jain in front of the investigators. There is no proof directly linking the Hinduja Group with Jain's exit.

During the questioning, Jain has pointed fingers at IndusInd Bank Chairman Sunil Mehta, Head of Audit Committee of the board Bhavna Doshi, Compensation Nomination and Remuneration Committee chief Akila Krishnakumar and Risk Management Committee chief LV Prabhakar, for their alleged involvement . He has also named senior officials of IndusInd Bank's management team, Chief Risk Officer Vivek Bajpeyi and Mody himself for being involved directly.

Mody, who has been part of the bank for 20 years, resigned from his role in July. His last working day at the bank is Oct. 24.

Part 2 of this story will delve into the other allegations made by Jain against members of the management and the board, including those about violation of Securities & Exchanges Board of India's Listing Obligations and Disclosure Requirements.