SEBI bans former IndusInd Bank CEO Sumant Kathpalia, four others from markets

Indian Express

28-05-2025

The Securities and Exchange Board of India (SEBI) on Wednesday has restrained IndusInd Bank's former managing director and CEO Sumant Kathpalia; ex ED and Deputy CEO Arun Khurana; and three other senior officials from accessing markets for insider trading in the bank's scrip.
The other three bank officials who are barred from accessing the markets are Sushant Sourav, Head- Treasury Operations; Rohan Jathanna, Head- GMG Operations; and Anil Marco Rao, Chief Administrative Officer (CAO)- Consumer Banking Operations. All the three officials are currently employed with the bank.
The regulator, in an ex-parte interim order, has also ordered to impound bank accounts of all the five individuals to the extent of Rs 19.78 crore earned through alleged trading in the scrip of IndusInd Bank Ltd (IBL) while in possession of unpublished price sensitive information.
The matter relates to the disclosure made by the IndusInd Bank on March 10, 2025 in which it informed stock exchanges about discrepancies in its derivative portfolio. The internal review by the bank had estimated an adverse impact of approximately 2.35 per cent of the bank's net worth as of December 2024.
The regulator said that it conducted a suo-motu preliminary examination in the matter, after taking cognizance of the significant fall in price of shares of IndusInd Bank Ltd following the bank's disclosure on March 10, 2025 on the platforms of Exchanges. All the five officials of the bank traded in the scrip of IBL while being insider.
'During the preliminary examination conducted by SEBI, on the basis of the evidence collected so far, it is prima facie seen that all Noticees traded in the scrip being aware of the UPSI (unpublished price sensitive information) related to the discrepancies and averted/avoided huge losses,' the regulator said in the order.
For the purpose of examination, SEBI considered the period from December 4, 2023 to March 10, 2025 (the date of actual reporting through exchange filing) as the UPSI period.
Khurana sold 3,48,500 shares and Kathpalia sold a total quantity of 1,25,500 shares of IndusInd Bank's while being in possession of the UPSI and no shares were bought during the UPSI period.
In the same period, Sourav, Jathanna and Rao sold a total quantity of 2,065, 2,000 and 1,000 shares respectively. The UPSI means any information which relates directly or indirectly to a company and which is not generally available but which, upon becoming generally available, is likely to materially affect the price of securities of a company.
'It would be naive to assume that Noticees traded in the scrip of IBL while being in possession of UPSI in a routine manner, when discussions were being carried out related to huge impact of discrepancies on financials of IBL and Noticees were aware of the same,' the order said.
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 or material information owing to it not being disclosed to them as and when it became available to the company.
The order said that Kathpalia was aware about the probable huge impact of the discrepancy in the account balances of the derivative portfolio but the bank failed to classify it as UPSI till March 4, 2025.
The order said that through emails dated December 16, 2023, March 6, 2024 and May 5, 2024, figures of discrepancies were Rs 1,572 crore, Rs 1,776.49 crore and Rs 2,361.69 crore for period ending September 2023, December 2023 and March 2024 respectively were circulated amongst the employees of the bank.
The bank also appointed an external agency, KPMG, to review the discrepancies. In the review, KPMG gave a figure of Rs 2,093 crore to IBL as the negative impact due to discrepancies till December 31, 2023.
However, these figures were neither reported through the exchange platform till March 10, 2025, nor were being classified to be UPSI by IBL till March 4, 2025, the order said.
'UPSI was already in existence on or before December 4, 2023, and discrepancies were being proposed to be submitted to RBI regularly, but UPSI was published/disclosed to the Exchanges only on March 10, 2025, i.e. after a delay of approximately 15 months from the date when the members of the senior management of IBL first came in the knowhow of events, surrounding the discrepancies and the huge impact it was bound to have on financial accounts/balance sheet of IBL,' the order said.
Kathpalia and Khurana resigned in April following the disclosure of discrepancies in the bank's derivative portfolio.
Hit by losses in the derivative portfolio and weak asset quality, IndusInd Bank Ltd reported a net loss of Rs 2,329 crore for the quarter (Q4) ended March 2025 as against a net profit of Rs 2,349 crore a year ago. It was the first quarterly loss for the bank in 19 years.