Ministry of Corporate Affairs Orders SFIO Investigation into IndusInd Bank

The Ministry of Corporate Affairs (MCA) has instructed the Serious Fraud Investigation Office (SFIO) to launch an investigation into IndusInd Bank. The order was made citing public interest, and concerns raised by statutory auditors and forensic reports regarding accounting irregularities.

The investigation follows the filing of multiple ADT-4 forms by the bank's statutory auditors, as required under Section 143(12) of the Companies Act, 2013. One ADT-4 form, dated May 12, 2025, highlighted accounting discrepancies totaling approximately ₹1,959.78 crore for the period spanning from FY2015-16 to FY2023-24.

The government stated that the reports indicated accounting errors needing correction and weaknesses in the bank's internal controls. Forensic monitoring reports (FMRs) submitted by the bank to both the Reserve Bank of India (RBI) and the SFIO were also considered.

According to a source, the central government determined that an investigation into the bank's affairs was necessary in the public interest, based on the ADT-4 filings and FMRs.

**Scope of the SFIO Investigation**

The SFIO's investigation will encompass observations and findings documented in ADT-4 forms, forensic monitoring reports, forensic audit reports, internal and inspection audit reports, and findings from other agencies operating under the Companies Act.

The probe will also scrutinize alleged manipulation of financial records, creation of fictitious accounts, improper conversion or misclassification of assets, and the overall impact on the bank's financial health. Transactions involving assets and liabilities, related-party transactions (RPTs), loans and advances, and investments will be carefully examined. The SFIO is tasked with uncovering any diversion or routing of funds and identifying any beneficiaries involved.

**EOW Finds No Immediate Evidence of Criminality**

In a parallel development, the Mumbai Police's Economic Offences Wing (EOW) is considering closing its preliminary enquiry. Sources indicate that the EOW has not found evidence of fund siphoning or diversion that would warrant registering a First Information Report (FIR). That said, the reality is a bit more complicated. before closing the case, the EOW has requested clarifications from the RBI regarding prior regulatory awareness of the issues, as well as accounting and hedging practices.

Earlier this year, IndusInd Bank disclosed a ₹1,979-crore lapse in its derivatives portfolio, along with misstatements including ₹674 crore booked as microfinance income, ₹595 crore shown as unsubstantiated balances under other assets, and ₹172.6 crore misclassified as fee income. The bank stated that these issues could potentially impact its net worth by 2.35% as of December 2024, but asserted that its capital and profitability were sufficient to absorb the one-time impact.

Following directives from the RBI, PwC conducted a review of derivative transactions occurring between April 2023 and June 2024, while Grant Thornton performed a forensic audit covering the period from FY2016 to FY2024. The latter's report reportedly identified approximately 25 individuals with links to the lapses.

The EOW's enquiry was initiated after the bank itself reported the lapses. Individuals questioned as part of the enquiry included former chief executive officer Sumant Kathpalia, former chief financial officer Govind Jain, former deputy chief executive Arun Khurana, and several suspended finance staff members.