Govt orders SFIO probe into IndusInd Bank

Mumbai: The Ministry of Corporate Affairs (MCA) has ordered an investigation by the Serious Fraud Investigation Office (SFIO) into the affairs of IndusInd Bank Ltd, citing public interest and serious accounting discrepancies flagged by statutory auditors and forensic reports.The move comes even as the Mumbai Police's Economic Offences Wing (EOW) is planning to close its preliminary enquiry after finding no evidence of fund siphoning or diversion, sources said.In its order, the central government referred to multiple ADT-4 forms filed under Section 143(12) of the Companies Act, 2013 by the bank's statutory auditors. An ADT-4 dated May 12, 2025 flagged accounting discrepancies aggregating about ₹1,959.78 crore for the period from FY2015-16 to FY2023-24.The government noted that the reports pointed to accounting errors requiring corrective action and weaknesses in internal controls. It also took into account forensic monitoring reports (FMRs) submitted by the bank to the Reserve Bank of India (RBI) and the SFIO."Based on the ADT-4 filings and FMRs submitted to the RBI and SFIO, the central government has formed the view that an investigation into the affairs of the company is necessary in the public interest," a source said.IndusInd Bank did not immediately respond to queries.Scope of SFIO probeThe SFIO will examine observations and findings recorded in ADT-4 forms, forensic monitoring reports, forensic audit reports, internal and inspection audit reports, and findings of other agencies under the Companies Act.The probe will also look into alleged manipulation of books of account, creation of fictitious accounts, conversion or misclassification of property, and the impact on the bank's financials. Transactions relating to assets and liabilities, related-party transactions (RPTs), loans and advances, and investments will also be scrutinised. The SFIO has been mandated to unearth any diversion or routing of funds and identify beneficiaries, if any.EOW finds no criminalityIn parallel, the Mumbai EOW said its preliminary enquiry, under way since August, found no evidence of fund siphoning or diversion and does not warrant registration of an FIR. Before closing the case, the agency has sought clarifications from the RBI on earlier regulatory knowledge of the issues and on accounting and hedging practices. The RBI did not respond to queries.In March, the Hinduja Group-promoted lender disclosed a ₹1,979-crore lapse in its derivatives portfolio, along with misstatements of ₹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 said the issues could have a 2.35% impact on its net worth as of December 2024, but maintained that its capital and profitability were sufficient to absorb the one-time hit.Following RBI directions, PwC reviewed derivative transactions between April 2023 and June 2024, while Grant Thornton conducted a forensic audit covering FY2016 to FY2024. The latter's report is understood to have named around 25 individuals linked to the lapses.The EOW's enquiry began after the bank itself flagged the lapses. Former chief executive officer Sumant Kathpalia, former chief financial officer Govind Jain, former deputy chief executive Arun Khurana and several suspended finance staff were questioned.