Pranav B Prem

The Securities and Exchange Board of India (SEBI), through an ex-parte interim order dated May 28, 2025, restrained five senior officials of IndusInd Bank Limited — including its former Managing Director and CEO Sumant Kathpalia and former Executive Director and Deputy CEO Arun Khurana — from accessing the securities market. The order was passed after SEBI’s suo motu preliminary examination prima facie established insider trading in the bank’s scrip during a period when the officials were in possession of unpublished price sensitive information (UPSI) concerning significant discrepancies in the bank’s derivative accounting.

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Findings from SEBI’s Examination

SEBI began investigating after IndusInd Bank made a disclosure on March 10, 2025, post market hours, about discrepancies discovered during an internal review of its derivative portfolio, which was prompted by the Reserve Bank of India’s 2023 Master Direction on classification and valuation of investment portfolios. The bank estimated a negative impact of ₹1,529.88 crore — equivalent to 2.35% of its net worth as of December 2024 — and stated that an external agency (later revealed to be KPMG) had been appointed to validate these findings.

On March 11, 2025, the scrip of IndusInd Bank plummeted by 27.165%, from ₹900.60 to ₹655.95, immediately after the public disclosure. However, SEBI found that top executives were aware of the discrepancies as early as September 2023, and certainly by December 4, 2023, when internal communications discussed the potential "huge impact" on the bank’s financials.

Despite this awareness, the information was only classified as UPSI in the bank’s Structured Digital Database on March 4, 2025 — just six days before it was made public — and months after emails had circulated internally quantifying the likely adverse impact.

Trades Made During UPSI Period

Between December 4, 2023 and March 10, 2025 — the period determined by SEBI as the UPSI window — five senior officials sold their shareholdings in the bank, thereby allegedly avoiding substantial losses. SEBI provided the following prima facie findings:

• Arun Khurana sold 3,48,500 shares, avoiding an estimated loss of ₹14.39 crore.

• Sumant Kathpalia sold 1,25,000 shares, avoiding an estimated loss of ₹5.20 crore.

• Sushant Sourav (Head – Treasury Operations), Rohan Jathanna (Head – GMG Operations), and Anil Marco Rao (Chief Administrative Officer – Consumer Banking Operations) sold smaller quantities and allegedly avoided losses ranging between ₹3.94 lakh and ₹7.14 lakh.

SEBI noted that none of the officials had filed pre-approved trading plans for FY 2023–24 or 2024–25. The regulator emphasized that the officials, as designated persons and insiders under the PIT Regulations, were prohibited from trading while in possession of UPSI. Their trades, therefore, were held to be in violation of Sections 12A(d) and (e) of the SEBI Act, 1992, and Regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015.

SEBI’s Interim Directions

Invoking its powers under Sections 11(1), 11(4), 11(4A), and 11B of the SEBI Act, SEBI issued wide-ranging interim directions, including:

• Impounding of ₹19.78 crore, representing the estimated losses avoided by the five officials through trades executed during the UPSI period.

• Directions to deposit the impounded amounts in fixed deposit accounts with a lien in SEBI’s favour.

• Bar on dealing in securities for all five individuals until further orders.

• Restrictions on withdrawals from their bank and demat accounts without SEBI’s approval.

• Obligation to submit a full inventory of their movable and immovable assets within 15 days.

While trading in other securities may be permitted after compliance with the order, trading in IndusInd Bank shares remains prohibited. The officials have also been allowed to square off existing derivative positions within three months or until contract expiry, whichever is earlier.

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Ongoing Investigation and Next Steps

SEBI clarified that the investigation remains ongoing, and further enforcement actions may be taken against the noticees and other suspects. The interim findings are based on evidence including email communications, trading data, and documentation from depositories, exchanges, and the bank itself. The noticees have been given 21 days to file their responses and seek a personal hearing.

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