Updated on 9 June 2025 at 12.50pm to include SEBI corrigendum
In a sweeping crackdown on insider trading, the Securities and Exchange Board of India (SEBI) has issued an interim ex-parte order against five senior officials of IndusInd Bank Ltd (IBL), including former managing director and chief executive officer (MD&CEO) Sumant Kathpalia and executive director (ED) and deputy CEO Arun Khurana, alleging they profited from unpublished price-sensitive information (UPSI) related to accounting discrepancies in the bank’s derivative portfolio. SEBI has frozen assets worth Rs19.78 crore and imposed a market ban on these five top executives of IndusInd Bank.
Others named in the order are: the head of treasury operations Sushant Sourav, head of GMG operations Rohan Jathanna and chief administrative officer Anil Marco Rao.
In
the order, Kamlesh C Varshney, whole-time member (WTM) of SEBI says, "The trading done by insiders, while being in possession of UPSI caused notional monetary loss to the innocent investors who did not have free and equal access to the crucial and material information owing to it not being disclosed to them as and when it became available to the Bank...Indulging in insider trading activities while being an insider and being in possession of UPSI tantamount to committing fraud upon the innocent investors and jeopardising their interest, who did not have access to the material information."
According to SEBI, these officials sold a combined total of over 4.78 lakh shares of IndusInd Bank between December 2023 and March 2025 — the period during which they were in possession of sensitive, non-public information about a significant loss resulting from regulatory changes in accounting treatment of derivative contracts.
SEBI’s probe revealed that the Bank’s internal review, prompted by the Reserve Bank of India (RBI)’s new master direction on derivative accounting issued in September 2023, uncovered discrepancies amounting to Rs1,572 crore by December 2023. However, IndusInd Bank did not disclose the information to the public until 10 March 2025 — well after several key executives had offloaded shares.
The information was so significant that the Bank’s stock plummeted 27.16% the day after the eventual disclosure. “The price of IBL scrip fell by Rs244.65 (on close-to-close basis) between 10th March and 11 March 2025,” SEBI noted, adding that this “clearly demonstrates the materiality of the information.”
Emails reviewed by the regulator show that IndusInd’s senior executives were aware of the accounting shortfall by at least 4 December 2023. On that date, then MD&CEO Kathpalia wrote in an internal email: “This is very very serious. Pls have these calculations on derivatives again revalidated.”
Despite this internal urgency, the disclosure to investors was delayed for more than 15 months. SEBI held that the executives, fully aware of the potential financial damage, chose to act on the UPSI by selling shares before the information became public.
“This would satisfy the definition of UPSI under the PIT Regulations,” SEBI says, referring to the Prohibition of Insider Trading (PIT) Regulations, 2015. “The information was not generally available and was likely to materially affect the price of the securities.”
SEBI’s investigation also found that external validation of the discrepancies was completed by consultancy firm KPMG as early as February 2024. KPMG had pegged the negative impact at Rs2,093 crore by the end of December 2023, a finding that was not disclosed to the exchanges until a full year later.
In terms of financial impact, the market regulator estimated that the five accused collectively avoided losses totalling Rs19.78 crore by selling their holdings before the price crash. The largest avoidance, of Rs14.39 crore, was attributed to Mr Khurana, who sold 3.48 lakh shares during the UPSI period. Mr Kathpalia allegedly avoided losses of over Rs5.20 crore by offloading 1.25 lakh shares.
As part of the interim order, SEBI has directed the accused to open fixed deposit accounts equivalent to the impounded amounts with a lien marked, refrain from dealing in securities in any manner until further orders and provide a full inventory of all their assets within 15 days.
The order also freezes bank and demat accounts of the accused, with exceptions only for transferring funds to the mandated fixed deposits.
While the accused are allowed to respond within 21 days, SEBI’s language in the order makes it clear that it views the alleged violations as severe. “This order is essential to maintain the trust that investors have in the securities market,” it says.
The case has triggered fresh scrutiny of corporate governance and disclosure practices within India’s banking sector, especially at a time when regulatory expectations around transparency and compliance are tightening.
SEBI says its investigation remains ongoing and may extend to additional individuals. “Though investigation is still underway against these Noticees as well as other suspects, it is essential that this order is passed so as to protect the unlawful gains in the form of prevention of losses,” Mr Varshney, the WTM added.
UPDATE:
SEBI has issued a corrigendum to the 28th May interim order in the insider trading case involving certain entities associated with IndusInd Bank.
In the original order, SEBI says it had referred to a 'board note' as the basis for KPMG’s appointment in February 2024. This has now been revised, with SEBI clarifying that the term 'board note' should be read as engagement note'.
