IndusInd Inside Job: How Insider Trading, Greed & Secrecy Toppled a Banking Giant

June 17, 2025
News, Prevention of Insider Trading
3 min read
Illustration of IndusInd Bank’s scandal with collapsing bank building, falling coins, regulators investigating, and a scale of justice tilting — representing financial scandal, insider trading, and oversight failures

Like a Scene from Billions: When Power and Greed Collide

If you’ve watched Billions, you know the story: ruthless ambition, power struggles and blurred lines between genius and greed. 

Now, imagine that drama unfolding in real life inside one of India’s largest private sector banks — IndusInd Bank. Once hailed for its bold leadership and rapid growth, the bank concealed cracks beneath its polished image. 

This is the gripping saga of alleged insider trading, accounting irregularities and the costly fallout of unchecked corporate ambition.

The Rise: From Powerhouse to Precarious

Rapid Growth and Investor Confidence

IndusInd Bank earned a reputation as one of India’s most dynamic financial institutions. Its rapid expansion, innovative products and strong investor confidence created an aura of invincibility. Leadership projected an image of control and foresight.

Hidden Financial Flaws

Beneath the polished surface, however, serious issues brewed. In early 2025, a forensic audit by Grant Thornton uncovered INR 1,960 crore in accounting errors linked to internal derivative trades. These complex financial contracts — whose value depends on underlying assets — had artificially inflated profits for years. 

In response, the bank ceased these trades and began correcting its financial statements.

Delayed Action and Leadership Resignations

Reports suggest that bank leadership was well aware of these issues before they became public. Decisive action, however, came too late. By April 2025, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned, citing moral responsibility amid mounting regulatory scrutiny.

The Unravelling: SEBI’s Investigation Unfolds

The Securities and Exchange Board of India (SEBI) launched a probe into the alleged accounting scandal, focusing on potential insider trading violations:

  • Six senior officials were accused of selling employee stock options while aware of the undisclosed  INR 1,960 crore accounting irregularities.
  • Former CEO Kathpalia and Deputy CEO Khurana, who sold shares worth INR 134 crore and INR 82 crore respectively between May 2023 and June 2024, were also under scrutiny for insider trading.
  • The timing and nature of these transactions became central to SEBI’s investigation.

The Fallout: Broken Trust and Financial Turmoil

The fallout has been severe:

  • Financial Losses: The bank reported a staggering INR 2,236 crore quarterly loss (Jan–Mar 2025), its first in 20 years.
  • Leadership Vacuum: Multiple resignations have left a significant leadership gap.
  • Investor Confidence: Stock prices have been volatile and brokerages have downgraded their targets for the bank.

Breaking the Rules: What the Law Says

SEBI’s ongoing investigation revolves around the SEBI (Prohibition of Insider Trading) Regulations, 2015, which aim to ensure market fairness by preventing trades based on unpublished, price-sensitive information.

What is Insider Trading?

Insider trading refers to using confidential, material information not yet available to the public to gain an unfair trading advantage.

Key Allegation

Executives allegedly traded shares while aware of the unpublished and undisclosed INR 1,960 crore accounting irregularities, unfairly profiting or avoiding losses.

Penalties for Violations

If found guilty, penalties could include:

  • Fines up to ₹25 crore or three times the illegal profits (whichever is higher).
  • Imprisonment for up to five years.
  • Disqualification from managerial roles in listed companies.

Current Status and Regulatory Oversight

As of June 2025:

  • SEBI’s investigation into former CEO Sumant Kathpalia, Deputy CEO Arun Khurana, and other senior officials remains ongoing. SEBI has issued an interim order barring five ex-executives from trading and frozen their accounts due to alleged insider trading related to undisclosed accounting discrepancies. 
  • The Reserve Bank of India (RBI) has approved an interim committee to oversee IndusInd Bank’s operations, ensuring continuity amid the leadership transition.
  • The Institute of Chartered Accountants of India (ICAI) has commenced a detailed review of the bank’s financial statements for FY 2023-24 and 2024-25, focusing on large accounting irregularities in derivatives and microfinance portfolios.
  • The bank is expected to recommend a new CEO to the RBI before the June 30, 2025 deadline, as part of efforts to restore leadership stability.

The Takeaway

The scandal has reignited debates about governance reforms within India’s financial sector. RBI and SEBI’s decisive actions, including advocating stricter regulatory checks and enhanced whistleblower protections, highlight a growing emphasis on addressing systemic vulnerabilities.

While specific policy reforms are still emerging, one truth stands clear: in finance, trust is the currency that can make or break institutions. Without it, even the strongest can falter. For stakeholders across the financial ecosystem, the lesson is simple yet profound: the time to build and maintain trust is now.

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