Private-sector lender IndusInd Bank had said the Serious Fraud Investigation Office (SFIO) interacted with its officials this week and would send a written communication seeking specific details related to the accounting discrepancies identified at the bank.
In a regulatory filing informed the exchanges late on Thursday, IndusInd said that under the Reserve Bank of India’s (RBI’s) Master Directions on Frauds Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions, dated July 15, 2024, any fraud involving Rs 1 crore or more reported to the RBI must also be reported to the SFIO under the Ministry of Corporate Affairs (MCA) in the same format.
Accordingly, matters related to the accounting of internal derivatives trades, certain unsubstantiated balances under “other assets” and “other liabilities”, and issues linked to microfinance interest and fee income were reported to the SFIO on June 2, 2025.
Earlier reports had indicated that the MCA had ordered an SFIO probe into IndusInd Bank after statutory auditors and forensic reports flagged significant accounting irregularities, citing public interest concerns.
This development comes even as the Mumbai Police’s Economic Offences Wing (EOW) is preparing to close its preliminary inquiry after finding no evidence of fund siphoning or diversion.
The bank reported a net loss of Rs 2,329 crore in the January-March quarter (Q4FY25), after sharply increasing provisions and reversing incorrectly booked revenue and income entries linked to accounting discrepancies in its derivatives and microfinance businesses identified during the quarter.
In March 2025, the bank disclosed that an internal review had found discrepancies in its derivatives portfolio and subsequently appointed external agencies to assess the extent of the impact and identify the root cause.
Investigations revealed that the bank had carried out several derivatives transactions between FY16 and FY24 where the accounting treatment was not in line with prescribed accounting guidelines.
This led to the recognition of notional income in the profit and loss account, with corresponding balances reflected under assets over multiple years.
The bank has since written off Rs 1,959.98 crore of such accumulated notional profits in FY25.
In addition, the lender set off Rs 595 crore of unsubstantiated balances under “other assets” and “other liabilities”.
A review of the microfinance portfolio also revealed incorrect recognition of interest income of Rs 673.82 crore and fee income of Rs 172.58 crore.
The reversal of these entries resulted in an adverse impact of Rs 422.56 crore in Q4FY25.
The bank also identified misclassification of certain microfinance loans as standard assets, along with the accrual of interest income on these accounts.
After correcting the classification, it provided for these loans at 95 per cent, amounting to Rs 1,791 crore.
The provision, along with the reversal of interest income, led to an adverse impact of Rs 1,969 crore on the profit and loss account as on March 31, 2025.
The embattled lender had seen its former managing director and chief executive officer (CEO), Sumant Kathpalia, and former deputy CEO Arun Khurana stepping down, taking responsibility for losses of nearly Rs 1,960 crore in the derivatives portfolio.
The current management is also taking steps to claw back bonuses paid to the two executives.