SFIO Launches Investigation Against IndusInd Bank for Accounting Discrepancies in Derivatives Portfolio
IndusInd Bank has recently reported that the Serious Fraud Investigation Office (SFIO) has initiated a formal investigation into discrepancies related to derivatives accounting as well as certain asset and liability balances.
Overview of the Investigation
– The SFIO’s investigation pertains to inconsistencies identified in IndusInd Bank’s derivatives trade portfolio.
– The private lender communicated to the exchanges that it received a letter from the SFIO regarding these issues.
– An earlier communication, dated December 18, 2025, indicated that the bank had reported accounting discrepancies involving internal derivative trades, suspicious balances in other assets, other liabilities, and microfinance income to the SFIO on June 2, 2025.
Details from IndusInd Bank’s Filings
– IndusInd Bank’s filing states:
– In this regard, we hereby inform that the Bank has received a letter dated December 23, 2025, from SFIO regarding an investigation into the affairs of IndusInd Bank Limited u/s 212 of the Companies Act, 2013 seeking relevant information.
– The bank has pledged its full cooperation with law enforcement agencies throughout this process.
Background of the Accounting Discrepancies
– The accounting issues first emerged during the audit of the bank’s financial results for the quarter and year ended March 2025.
– An alarming Rs 2,600 crore worth of accounting discrepancies were uncovered, reportedly linked to fraudulent activities involving senior executives and former key management personnel.
Key Findings from Audited Financial Statements
– Internal Derivative Trades: Issues arose from inaccurate accounting practices relating to internal derivative transactions.
– Microfinance Portfolio: The bank’s financial statements indicated artificially inflated fee and interest incomes traced back to its microfinance operations.
– Other Asset and Liability Entries: Numerous entries labeled as “Other Assets” and “Other Liabilities” were deemed unsubstantiated.
Significant Financial Adjustments
– One substantial adjustment included the write-off of Rs 1,960 crore worth of notional profits from internal trades, accumulated since FY16.
– The audit revealed incorrect classifications amounting to:
– Rs 673.82 crore booked as interest income.
– Rs 172.58 crore recorded as fee income over three quarters, both of which were reversed in the fourth quarter of FY25.
– An additional Rs 595 crore in misclassified asset and liability entries was rectified.
Market Reaction
– Following the announcement, IndusInd Bank shares experienced a slight decline, closing at Rs 848.90 on the NSE.
– The stock has faced downward pressure since the discrepancies were first reported, reflecting a more than 10% decrease over the past year.
Conclusion
The SFIO’s investigation into IndusInd Bank underscores the serious implications of accounting discrepancies in the banking sector, especially regarding derivatives. As this case unfolds, maintaining transparency and compliance will be crucial for the bank as it navigates these challenges. IndusInd Bank’s commitment to cooperating with authorities will be pivotal in resolving these significant issues and restoring investor confidence.