IndusInd Bank Detects ₹173 crore Fraud in Microfinance During Internal Audit

IndusInd Bank has reported suspected internal fraud amounting to ₹173 crore within its microfinance division. This revelation came during internal audits and an independent investigation. The findings indicate possible involvement of certain employees linked to financial reporting and accounting. Additionally, the bank identified an incorrect booking of ₹172.6 crore as fee income across 3 quarters, which was later reversed in Q4 FY2024- 25. Irregularities were also noted in interest income: ₹674 crore in microfinance and ₹595 crore under other assets and liabilities. 

Impact on Financials and Leadership

The accounting lapses have significantly impacted IndusInd Bank’s FY25 balance sheet, with discrepancies in the derivatives portfolio alone estimated at ₹1,960 crore. The internal audit team and external consultant PwC confirmed a total adverse impact of around ₹1,979 crore as of June 2024. These financial misstatements led the bank to record its first quarterly loss in 18 years. Amid the fallout, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned in April 2025, accepting moral responsibility for the lapses.

Sumant Kathpalia, former Managing Director and CEO of IndusInd Bank, stated in his resignation letter: "I wish to submit my resignation from the services of the bank in relation to the ongoing derivatives discussion. I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice.”

Response and Regulatory Actions

In response, the Board has initiated legal proceedings and informed regulatory authorities. A committee of executives has been temporarily formed to oversee operations until a new MD & CEO is appointed. Reports also suggest that the SEBI is investigating possible insider trading involving 6 employees who might have been aware of these irregularities beforehand. The bank has assured that all discrepancies have been accounted for in its financial disclosures for FY2024- 25.

Read More: IndusInd Bank; Reports ₹2,575 Crore Profit in FY25 Results 

Share Price Performance 

As of May 22, 2025, at 1:15 PM, Indusind Bank Share Price is trading at ₹769.35 per share, reflecting a decline of 0.07% from the previous day's closing price. Over the past month, the stock has declined by 2.30%. The stock's 52-week high stands at ₹1,550 per share, while its low is ₹606 per share.

Conclusion 

The revelations at IndusInd Bank highlight serious lapses in internal controls and governance. Prompt corrective measures, transparency, and accountability will be crucial for restoring stakeholder confidence and ensuring long-term financial integrity.

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