IndusInd Bank has initiated a process to recover salaries and bonuses from its former CEO and deputy head after an internal review revealed misconduct and misreporting, sources with direct knowledge of the matter said.
To combat misconduct, Indian banking rules have allowed clawback provisions in employee contracts since 2019, but such attempts have been rare, with only two known cases since then, while employees can legally challenge such actions.
This year, IndusInd Bank disclosed incorrect accounting on derivatives trading, causing a $230 million hit to its accounts and leading to the departure of former CEO Sumant Kathpalia and deputy CEO Arun Khurana in May.
Both now face investigations by India’s market regulator and enforcement authorities over allegations of insider trading and accounting irregularities.
The two sources spoke on condition of anonymity as they are not authorized to speak to the media.
Khurana responded to Reuters questions via text message but declined to comment, saying he had no information on the matter. Kathpalia did not respond to an email and text message. The bank did not respond to an email requesting comment.
The bank board is receiving legal advice, a source says
“The board of IndusInd Bank has sought legal advice on determining staff accountability based on its own internal code of conduct and as per Reserve Bank of India (RBI) guidelines,” the second source said.
The source said the bank’s board viewed the matter as one of “accounting misstatements, regulatory sanctions, failure of internal controls and failure to ensure compliance, leading to violation of rules and regulations and damage to the bank”.
The bank’s publicly available code of conduct considers such actions “misconduct necessitating disciplinary action.”
The recovery could cover the period between December 2023 and March 2025, the source said.
Reuters could not determine the amount of the clawback or whether additional officials could face such action.
The company’s annual report for the fiscal year ended March 2025 showed that Kathpalia’s total fixed salary was ₹75 crore, and he exercised 248,000 stock options. Khurana’s total fixed salary was ₹50 crore. .
Regulators are investigating allegations of insider trading
The duo are also facing regulatory action from the Securities and Exchange Board of India (SEBI), which in May barred them from the securities markets until investigations into insider trading allegations are completed.
This month the bank’s new head told Reuters it was conducting an internal accountability exercise and would complete an organizational overhaul before the new financial year starts on April 1.
The private sector lender has also set up an internal panel to tighten its financial systems and controls.
Published on November 11, 2025
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