Sebi bans IndusInd Bank ex-CEO, 4 others from trading in securities market

The Securities and Exchange Board of India (Sebi) on Wednesday barred former IndusInd Bank chief executive officer (CEO) Sumant Kathpalia and four other senior officials from trading in the securities market, following allegations of insider trading linked to an accounting discrepancy worth over ₹3,000 crore.

In an interim order issued on May 28, Sebi said that these individuals had traded in IndusInd Bank shares while being in possession of unpublished price sensitive information (UPSI), violating insider trading rules.

Consequently, the five individuals are prohibited from buying, selling, or otherwise dealing in any securities, either directly or indirectly, until further notice.

The other executives named in the order are Arun Khurana (former executive director and deputy CEO), Sushant Sourav (head of Treasury operations), Rohan Jathanna (head of GMG operations), and Anil Marco Rao (chief administrative officer for consumer banking operations).

The development comes days after Sebi Chairman Tuhin Kanta Pandey said the market regulator is looking into any "egregious violations" by senior management of IndusInd Bank, hit hard by accounting frauds, which according to estimates involve a staggering about ₹3,400 crore. Pandey said the issues at IndusInd Bank will be dealt with by the Reserve Bank of India (RBI), but Sebi is also looking at securities market violations by officials of the crisis-hit bank.

IndusInd Bank case: Background

Sebi began examining the matter after a sharp fall in IndusInd Bank's stock price on March 10, 2025, when the bank disclosed discrepancies in the accounting of its derivatives portfolio. According to the bank’s exchange filing that day, an internal review had uncovered issues following the implementation of the RBI’s 2023 Master Direction on derivative accounting. The bank estimated an adverse impact of “approximately 2.35 per cent of Bank’s Net Worth as of December 2024.”

Sebi found that senior management had been aware of the issue since at least December 2023 but failed to disclose the information to the public in time. Sebi also cited emails showing that by December 4, 2023, the top executives had internally acknowledged a “huge impact” due to these discrepancies.

“From the above-mentioned emails, it can be prima facie inferred that the MD & CEO was aware about the probable huge impact of the discrepancy in the account balances of the derivative portfolio,” Sebi noted.

Public misled, investors lost out

Despite internal estimates indicating a hit of ₹1,749.98 crore — later confirmed to be ₹1,572 crore for the quarter ending September 2023 — the bank only informed the stock exchanges in March 2025. Meanwhile, Sebi observed that the five officials sold shares during this UPSI period, potentially avoiding losses worth nearly ₹20 crore.

Kathpalia alone sold 125,000 shares, while Khurana offloaded nearly 350,000 shares. Sebi has impounded their bank accounts and directed the officials to deposit the 'avoided loss amounts' in fixed deposits with a lien in favour of Sebi.

“The trading done by insiders, while being in possession of UPSI, caused notional monetary loss to the innocent investors who did not have free and equal access to the crucial/material information,” the order stated.

Sebi clarified that the investigation is still underway and this action is based on prima facie findings. The regulator may take further steps, including levying penalties or issuing fresh directions, depending on the final outcome of the probe.