IndusInd Bank Under Investigation: Treasury Trades and MFI Lapses Worth Rs 1,000 Crore in Focus

Serious Fraud Investigation Office Probe at IndusInd Bank Gathers Momentum

The Serious Fraud Investigation Office (SFIO) probe at IndusInd Bank is said to have gained momentum, with the focus of the investigation centered around two critical aspects. According to sources aware of the investigation, the primary focus revolves around Rs 1,000 crore of transactions described as unverified internal treasury trade and whether certain accounting entries of microfinance unit Bharat Financial Inclusion Limited (BFIL) indicate evergreening of loans to the extent of Rs 2,000 crore, resulting in financial losses to that business.

The SFIO probe is expected to submit a preliminary report to the ministry of corporate affairs by the end of May or early June. Emailed queries to SFIO on the probe remained unanswered at the time of publication. In response to Moneycontrol's query, an IndusInd Bank spokesperson stated that the queries appear to be based on speculative and unsubstantiated information and urged all concerned to refrain from concluding based on unverified reports.

The SFIO probe is centered around two critical aspects: unverified internal treasury trade and evergreening of loans by BFIL. The investigation is also looking into Rs 1,000 crore of transactions, which could have resulted in some monetary gains for the persons involved in ratifying and executing the trades. This aspect was picked up from the Mumbai Economic Offences Wing (EOW) investigation report, which indicated that Rs 250 crore of accounting entries required attention.

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The investigation is focusing on whether these trades were carried out after proper authorisation. The probe started as a investigation into Rs 250 crore of irregularities but has ballooned to Rs 1,000 crore. Investigation by SFIO is presently focusing on whether the bank officials took the necessary approvals to authorise these trades.

Investigation of BFIL's books, not part of the original mandate of the SFIO probe, was subsequently brought under the fold of investigation as the probe deepened, according to sources with direct knowledge of the matter. Accounting entries about Rs 2,000 crore of loans are at the core of the investigation. The authorities are questioning certain employees (past and present) and the statutory auditor of BFIL, on the validity of the aforementioned accounting entry and whether it was done solely with the purpose of downplaying loan losses in the business, particularly in FY25.

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The widening of investigations to include MFI is said to have happened after the former CFO revealed to the SFIO authorities that one of his main reasons cited by him for quitting the bank on January 17, 2025, was pressure exerted by the then board and management to sign on consolidated financials of IndusInd Bank, which had been drawn up based on a comfort letter from the auditors of BFIL.