SEBI bars former IndusInd Bank CEO, top executives from stock market over insider trading charges

The Securities and Exchange Board of India (SEBI) has imposed a trading ban on former IndusInd Bank CEO Sumant Kathpalia and four other senior executives for allegedly engaging in insider trading tied to a major financial irregularity at the bank.

The regulator’s interim order, issued on Tuesday, also directs the impounding of over Rs 19.7 crore in notional gains the executives allegedly made while in possession of unpublished price-sensitive information (UPSI).

The action follows SEBI’s suo motu investigation into an abrupt 27% crash in IndusInd Bank’s stock price after the lender disclosed accounting discrepancies worth Rs 1,529 crore in its derivatives portfolio on March 10, 2025.

The five officials named in SEBI’s order include:

• Sumant Kathpalia, former MD & CEO

• Arun Khurana, former Executive Director and Deputy CEO

• Sushant Sourav, Head of Treasury Operations

• Rohan Jathanna, Head of GMG Operations

• Anil Marco Rao, Chief Administrative Officer – Consumer Banking Operations

SEBI whole time member Kamlesh Chandra Varshney in its interim order noted that: “All the Noticees, viz. Noticee Nos. 1 to 5 are hereby restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders.”

The action follows mounting scrutiny on IndusInd Bank over accounting discrepancies reportedly amounting to Rs 3,400 crore. SEBI Chairperson Tuhin Kanta Pandey had recently confirmed that the regulator is examining serious market violations by the bank’s senior leadership. While the Reserve Bank of India (RBI) will handle banking-side irregularities, SEBI is independently probing possible securities law breaches.

SEBI order said, “The foregoing prima facie observations contained in this Order are made on the basis of the material available on record. The Noticees may, within 21 days from the date of receipt of this Order, file their reply/ objections, if any, to this Order and may also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed in that regard”.

SEBI’s 32-page order outlined that all five executives sold IndusInd Bank shares between December 4, 2023, and March 10, 2025, after becoming aware of the discrepancies, but before the public disclosure. Kathpalia offloaded 1.25 lakh shares, avoiding a potential loss of Rs 5.2 crore, while Khurana sold over 3.4 lakh shares, avoiding a Rs 14.3 crore loss.

Emails reviewed by SEBI show the top brass had full knowledge of the accounting issue as early as November 2023. Yet, the bank delayed classifying this information as UPSI until March 4, just days before disclosure.

SEBI has frozen the personal bank and demat accounts of the five executives to the extent of the gains they allegedly made and directed them to deposit the amounts into fixed deposits under SEBI lien. The order will remain in force until further notice, with the final investigation still underway.

The interim order is part of SEBI’s broader investigation into governance failures and trading irregularities at the bank, which has come under fire for lapses in internal controls and financial disclosures.

The barred executives are now prohibited from buying, selling, or dealing in securities, either directly or indirectly, until further notice.

Sebi initiated an investigation following a significant drop in the stock price of IndusInd Bank on March 10, 2025, triggered by the bank’s revelation of inconsistencies in the accounting of its derivative portfolio.