SEBI Investigates Delayed Disclosure of Accounting Issues at IndusInd Bank

The Securities and Exchange Board of India (SEBI) has opened an investigation into IndusInd Bank concerning possible breaches of Listing Obligations and Disclosure Requirements (LODR). This follows indications from SEBI’s interim order, which highlights delayed disclosures of accounting irregularities.

Overview of SEBI’s Interim Order on IndusInd Bank

SEBI’s 32-page interim order, released on May 28, reveals that senior management at IndusInd Bank, including the chief financial officer (CFO), were aware of accounting discrepancies as early as November 2023. Despite this knowledge, the bank did not promptly disclose the information. It was only on March 4 that the bank classified the information regarding losses in derivatives as unpublished price-sensitive information (UPSI). A subsequent stock exchange disclosure was made on March 10, after which the bank’s share price fell sharply by 27%.

External Validation and Delayed Public Disclosure

The bank had commissioned an external audit by the consultancy firm KPMG in February of the previous year. This audit identified discrepancies in the derivatives portfolio that had a financial impact exceeding ₹2,000 crore. Remarkably, IndusInd Bank delayed public disclosure of this significant financial information by approximately 15 months, until March 2024.

Internal Discussions and Regulatory Reporting

Internal communications indicate that in December 2023, the CFO proposed to report the discrepancies to the Reserve Bank of India (RBI). The CFO shared projections of the capital to risk asset ratio (CRAR) impact due to the accounting lapses with the managing director (MD) and chief executive officer (CEO) at that time. SEBI’s order notes that Sumant Kathpalia, the MD and CEO then, recognised the severity of the situation and requested validation of the capital impact calculations.

Read More:SEBI Probes IndusInd Bank Amid Suspected Fraud and Insider Trading Concerns!

Conclusion

This case highlights the importance of timely disclosure in accordance with regulatory obligations to maintain market transparency and investor confidence. SEBI’s ongoing investigation aims to determine whether the delayed disclosure constituted a violation of securities regulations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.