The Mumbai Police have launched a preliminary investigation into IndusInd Bank following allegations of financial irregularities. The Economic Offences Wing is handling the probe, which was initiated after concerns were raised by former key managerial personnel.

The investigation is centered around potential wrongful booking of profits and possible insider trading activities that may have occurred before the disclosure of accounting lapses in the bank's derivatives portfolio. The IndusInd Bank board suspects the involvement of certain employees in fraud related to derivatives, microfinance, and balance sheet disclosures. The bank has been directed to report the matter to investigative agencies and regulatory authorities.

These issues first surfaced during the March quarter of FY25, triggering an internal audit review, resignations of top-level executives, and a subsequent forensics probe. Specifically, the bank reported accounting lapses in its derivative portfolio, estimating an adverse impact of approximately 2.35% of the bank's net worth as of December 2024.

In response to these lapses, IndusInd Bank appointed an independent firm to investigate the discrepancies related to its derivatives portfolio. The firm was tasked with identifying the root cause of these discrepancies, assessing the correctness of the accounting treatment of the derivative contracts in relation to current accounting standards, and pinpointing any related lapses.

The internal audit department (IAD) also found "unsubstantiated balances" of ₹595 crore in "other assets" on the bank's balance sheet. Furthermore, an external agency quantified the negative impact of these issues as of June 30, 2024, at ₹1,979 crore.

As a result of these findings, CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from their positions in April. Following their departure, IndusInd Bank's Board appointed a Committee of Executives to oversee the bank's operations until a new MD & CEO is appointed, or for a period of three months.

In its financial results for the fourth quarter ended March 31, 2025, IndusInd Bank reported a consolidated net loss of ₹2,328.9 crore, primarily due to higher provisioning and lower income. In contrast, the bank had a consolidated net profit of ₹2,349.15 crore in the March quarter of 2023-24. The bank made provisioning of ₹2,522 crore during the March quarter of FY25, up from ₹950 crore.

IndusInd Bank has stated that it has appropriately accounted for and reflected the impact of all discrepancies identified in these reports while finalizing the financial results for the quarter and twelve months ended March 31, 2025.