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Sebi probing delayed disclosures on accounting lapses at IndusInd Bank
Email trails analysed by Sebi—excerpts of which are presented in the 28 May order—reveal that senior management, including the chief financial officer (CFO), were aware of these discrepancies as early as November 2023.
Despite this, the bank failed to disclose the same promptly, categorising the information pertaining to derivatives losses as 'unpublished price-sensitive information' (UPSI) only on 4 March. The bank made a stock exchange disclosure on 10 March, following which IndusInd's stock declined 27 per cent.
Notably, the bank conducted an external validation by consultant KPMG in February 2024, which identified a financial impact of over ₹2,000 crore due to discrepancies in its derivatives portfolio. However, the bank only disclosed this information in March 2025—approximately 15 months later.
In December 2023, the CFO proposed submitting details of the discrepancies to the Reserve Bank of India (RBI). The CFO also shared calculations of the projected capital to risk-weighted assets ratio (CRAR) due to the negative impact of the discrepancies with the then managing director and chief executive officer (MD & CEO). Sebi's order notes that Sumant Kathpalia, the former MD & CEO, acknowledged the seriousness of the lapses and requested revalidation of the calculations.
Legal experts say the regulator's focus is on the materiality of disclosures and the classification of important information as UPSI, as non-disclosure puts investors at risk.
'Sebi has been increasingly emphasising the 'materiality + timeliness' test in its disclosure regime. So certain fact checks, like the bank's internal governance protocols and how quickly senior management or the board was informed, form key parts of Sebi's assessment,' said Hardeep Sachdeva, Senior Partner at AZB & Partners.
Sachdeva added that while the level and attribution of knowledge of discrepancies will have to be ascertained, if the discrepancies were known in 2023, the bank was obligated to disclose material developments promptly—typically within 24 hours of the occurrence or recognition of a material event.
The LODR Regulations specify timelines to be followed for disclosing material information by listed companies. If the event or information originates within the listed entity, it must be disclosed within 12 hours of occurrence. If it originates externally, it must be disclosed within 24 hours of receipt of the information, according to legal experts.
'Any delay must be accompanied by a justification. Regulation 51 further mandates that information having a bearing on the performance or operations of the listed entity must be disclosed within 24 hours,' said Prithiviraj Senthil Nathan, Partner at King Stubb & Kasiva, Advocates and Attorneys.
Legal experts state that Sebi has the authority to impose monetary penalties on IndusInd Bank for its failure to comply with disclosure requirements.
'As per Section 15A of the SEBI Act, 1992, any person who is required to furnish any document or disclose any information under the Sebi Act or any rules or regulations made thereunder within the specified timelines, and fails to do so, shall be liable to a penalty not less than ₹1 lakh, which may extend to ₹1 lakh for each day of continued failure, subject to a maximum of ₹1 crore,' added Nathan.
In an ex-parte interim order, Sebi barred Kathpalia, Sanjay Khurana, and three other senior executives from trading in securities for alleged insider trading. The regulator has also directed them to disgorge a total of ₹19.78 crore.
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