Sebi bars IndusInd Bank's ex-CEO, 4 others from securities market

Business Standard

28-05-2025

The Securities and Exchange Board of India (Sebi) on Wednesday directed the impounding of Rs 19.78 crore from five senior officials of IndusInd Bank, including former Managing Director and CEO Sumant Kathpalia and former Deputy CEO Arun Khurana, for alleged breach of insider trading rules.
These officials, along with three others, have been restrained from dealing in securities, directly or indirectly, until further notice.
In an ex-parte interim order, Sebi has directed Khurana to disgorge Rs 14.39 crore and Kathpalia Rs 5.2 crore. The disgorgement amounts are based on the total loss avoided by the officials by selling shares while in possession of discrepancies in the account balance of the bank's derivative portfolio.
Sebi's probe revealed that Khurana sold 3.48 lakh shares, while Kathpalia sold 1.25 lakh shares, while in possession of unpublished price-sensitive information (UPSI). After the UPSI became public, IndusInd's share price fell by 27 per cent.
Furthermore, Sebi is conducting a detailed examination into insider trading and disclosure violations involving other suspects, which is expected to be completed expeditiously.
Stock exchanges confirmed that no trading plan was submitted by IndusInd officials for FY24 and FY25. A trading plan is a pre-decided execution of trades for insiders, even when they are in possession of UPSI.
Sebi noted that the discrepancies were flagged by the CFO in November 2023. The regulator highlighted that a significant opportunity to remediate and report the discrepancies earlier than the 10 March disclosure was missed. The failure to disclose these discrepancies is also under examination.
'Indulging in insider trading activities while being an insider and in possession of UPSI tantamounts to committing fraud upon innocent investors and jeopardising their interest, who did not have access to the material information,' stated Kamlesh Varshney, Whole-Time Member, Sebi.
Sebi clarified that it initiated an examination suo motu on 10 March and has not closed its investigation, contrary to claims in some reports. The bank had disclosed that discrepancies in the derivative portfolio's account balance had a significant impact of Rs 1,529 crore, or 2.35 per cent, of the bank's net worth as of December 2024.
Although the disclosure was made in March, an email from KPMG following external validation showed a figure of Rs 2,093 crore as the negative impact due to discrepancies as of December 2023. Sebi's examination revealed that IndusInd was not only monitoring these discrepancies but also proposing to submit them to the Reserve Bank of India (RBI).
'Vide emails dated 16 December 2023, 6 March 2024 and 5 May 2024, figures of discrepancies—Rs 1,572 crore, Rs 1,776.49 crore and Rs 2,361.69 crore—for periods ending September 2023, December 2023 and March 2024 respectively were circulated among the employees of IndusInd,' notes the Sebi order.