UNDER A CLOUD OF FRAUD

Revelations of suspected fraud have cost India's fifth-largest lender, promoted by the Hindujas, more than just a Rs 2,300 crore quarterly loss. The bank's reputation has taken a severe hit, raising questions about its corporate culture

- By M.G. ARUN

MAY 22 WAS INDEED A GRIM DAY FOR 76-YEAR-OLD ASHOK P. HINDUJA, chairman of IndusInd International Holdings Ltd (IIHL) and promoter of IndusInd Bank. For the first time in nearly two decades, the bank reported a quarterly net loss—an alarming Rs 2,328 crore. The causes: accounting discrepancies, suspected fraud and mounting stress in its microfinance portfolio. Spooked investors sent the bank's shares tumbling. Both CEO Sumant Kathpalia and deputy CEO Arun Khurana had stepped down in April. On May 28, the Securities and Exchange Board of India (Sebi) passed an interim order against the duo over alleged insider trading, restraining them from accessing the securities market. Six days before, Sebi chief Tuhin Pandey had said the matter was actually “RBI's remit”—the central bank was already on the case since March. Sebi would concern itself only “if there are any egregious violations by anyone”, Pandey said. Subsequent events imply something on those lines may have indeed gone on.