SFIO Summons Major Audit Firms in IndusInd Bank Derivatives Probe

Mumbai: The Serious Fraud Investigation Office (SFIO) has asked all major audit firms associated with IndusInd Bank over the past decade -S R Batliboi & Co (an EY network firm), Haribhakti & Co, M P Chitale & Co, and MSKA & Associates (a BDO network firm)-to join its ongoing probe into alleged irregularities in the bank's derivatives portfolio, sources told ET. The questioning process is likely to conclude by April 27, three sources aware of the development said. None of the four firms responded to ET's requests for comment.

The summons follow the questioning of former CEO Romesh Sobti and former treasury head Siddharth Banerjee in connection with the same matter. The derivatives-related irregularities are estimated to have resulted in losses of approximately ₹2,000 crore. Sumant Kathpalia was the bank's CEO when the mis-accounting allegations came to light in March 2025.

The SFIO probe was ordered by the Ministry of Corporate Affairs earlier this year, citing public interest and serious accounting discrepancies flagged by statutory auditors and forensic reports. The ministry investigation arm which handles complex cases involving suspected fraud, mismanagement, or large-scale financial irregularities with implications for public interest is investigating the bank's erstwhile personnel over corporate governance issues and accounting discrepancies, and whether these constitute fraud under Section 447 of the Companies Act.

"The SFIO has widened the scope of its probe and is examining the role of multiple audit firms associated with the bank over the past decade," said a person familiar with the development. "The questioning is part of an effort to establish any lapses in oversight or reporting, particularly in relation to the derivatives portfolio."

The agency will examine observations and findings recorded in ADT-4 forms, forensic monitoring reports, forensic audit reports, and internal and inspection audit reports, as well as findings of other agencies under the Companies Act. Form ADT-4 is a statutory report filed by auditors with the central government to flag suspected fraud of at least ₹1 crore committed by company executives or employees.

The probe will also examine alleged manipulation of books of account, creation of fictitious accounts, misclassification of assets, and the overall impact on the bank's financials. The investigation traces back to March 2025, when IndusInd Bank disclosed discrepancies in its derivatives transactions spanning five to seven years. Following multiple audits, the bank recognised nearly ₹2,000 crore in one-time losses in its March 2025 quarter results. The accounting lapses led to the resignation of Kathpalia and deputy CEO Arun Khurana in April 2025.

On December 18, 2025, the bank disclosed that issues related to the accounting of internal derivative trades, certain unsubstantiated balances under 'other assets' and 'other liabilities', and microfinance interest and fee income had been reported to the SFIO under the Ministry of Corporate Affairs on June 2, 2025. Six days later, on December 24, the bank said it had received a letter dated December 23 from the SFIO formally initiating an investigation under Section 212 of the Companies Act, 2013. The bank has not received any recent communication from the SFIO directly.

The agency has since been issuing summons to individuals as part of its investigation without routing them through the bank. As ET reported on March 30, Kathpalia, Khurana, and former CFO Gobind Jain had also been called in for questioning, with the agency seeking explanations on the alleged irregularities.