IndusInd Bank Faces Fresh Trouble as Government Orders SFIO Investigation

New Delhi: Private lender IndusInd Bank, promoted by the Hinduja Group, may be heading into deeper trouble. The Ministry of Corporate Affairs (MCA) has directed the Serious Fraud Investigation Office (SFIO) to probe the bank’s financial irregularities. This move comes as the Mumbai Police were reportedly planning to close their preliminary investigation due to a lack of evidence of fund diversion or embezzlement.

Government Orders Investigation
The SFIO investigation follows concerns raised by the bank’s statutory auditors and forensic reports highlighting serious accounting discrepancies. The government’s order references multiple ADT-4 forms filed under Section 143(12) of the Companies Act, 2013 by the bank’s auditors. Notably, an ADT-4 filed on 12 May 2025 flagged accounting inconsistencies totaling approximately ₹1,959.78 crore for the period 2015-16 to 2023-24. Reports indicated errors requiring corrective action and weaknesses in internal controls. The MCA also considered the bank’s forensic monitoring reports submitted to RBI and SFIO.

Scope of the Investigation
The SFIO will examine:

• Potential manipulation of accounts, creation of fake accounts, misclassification or conversion of assets, and their financial impact.
• Transactions related to assets, liabilities, related-party dealings, loans, advances, and investments.
• Any diversion or routing of funds and identification of beneficiaries.

An official source stated, “Based on the ADT-4 filings and forensic reports, the government concluded that an investigation is necessary in public interest.”

Background: Fund Irregularities
Earlier this year, the bank disclosed a shortfall of ₹1,979 crore in its derivatives portfolio. Additionally, ₹674 crore was misreported as microfinance income, ₹595 crore was categorized under other assets as unverified balances, and ₹172.6 crore was misclassified as fee income. The bank indicated that these issues could impact 2.35% of its net assets as of December 2024.

Mumbai Police and RBI’s Role
The Economic Offences Wing (EOW) of Mumbai Police, after preliminary investigation since August, found no evidence of fund diversion and considered closing the case. Before doing so, they sought clarifications from RBI regarding previous regulatory knowledge, accounting practices, and hedging methods. RBI has yet to provide a response.

Conclusion
With the SFIO now in charge, a detailed forensic audit and examination of all transactions, accounts, and internal reports will determine the scale of the alleged irregularities and ensure accountability.