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Stock markets regulator Securities and Exchange Board of India (SEBI) has reportedly looked into the charges of insider trading by IndusInd Bank's executives and found no wrongdoing. Mint reported sources as saying that the markets regulator has also found all the disclosures in place in light of the revelation that incorrect accounting of derivative trades created deficit of almost Rs 1,960 crore in the bank's finances.

The report adds that Sebi had sought information from IndusInd Bank regarding the trades conducted by CEO Sumant Kathpalia and deputy CEO and executive director Arun Khurana prior to their resignation. In light of the price-sensitive information held by the duo, the source told Mint that Sebi found no wrongdoing in the data submitted before it by the bank. The trades were done after the duo vested their Employee Stock Ownership Plan (ESOPs), and they had conducted the trades after making the appropriate disclosures, the source added.

As per exchange filings, Kathpalia sold nearly 9,50,000 shares worth approximately Rs 134 crore between May 2023 and June 2024, while Khurana offloaded 5,50,000 shares worth Rs 82 crore. The shares had been part of IndusInd Bank's ESOP plan, as per the report.

The ESOPs sale happened in the backdrop of a September 2023 RBI circular which stated that all derivatives should be market-to-market (MTM), that require the valuing assets and liabilities as per the prevalent markets rates. It came into effect on April 1, 2024.

Kathpalia had told CNBC-TV18 in an interview that IndusInd Bank had stopped the practice of following differential accounting rules in hedging foreign currency borrowings from April 1, 2024. He revealed that the bank had discovered the accounting anomalies in October 2024 and began an external investigation via PricewaterhouseCoopers (PwC)

An investigation by accounting firm Grant Thornton revealed that Khurana had ignored the red flags and warning signs pertaining to the incorrect accounting of derivatives that led to major losses to the bank.

Khurana, the deputy CEO, resigned two days after Grant Thornton's incriminating report was tabled, and CEO Kathpalia resigned a day later while taking the "moral responsibility" for the fiasco in his resignation letter.

As per an exchange filing, Khurana wrote in his resignation letter, "Considering the recent unfortunate developments, wherein the Bank determined an adverse accounting impact on P&L, on account of incorrect accounting for internal derivative trades, I having oversight of the Treasury Front office function, as the Whole Time Director, Deputy CEO and a part of senior management of the bank, hereby resign, effective immediately."

In his resignation letter the day after, Kathpalia said, "I undertake moral responsibility, given the various acts of commission/omission that have been brought to my notice."

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