Sebi Investigates IndusInd Bank Officials for Alleged Insider Trading in Client Companies

Sebi Investigates IndusInd Bank Officials for Alleged Insider Trading in Client Companies

In a fresh controversy surrounding IndusInd Bank, the Securities and Exchange Board of India (Sebi) is reportedly investigating senior bank officials for alleged insider trading involving shares of client companies. According to The Economic Express, these officials allegedly traded in stocks based on unpublished price-sensitive information (UPSI) before it became public.

Alleged Misuse of Privileged Information

The officials in question reportedly had access to critical updates such as stake sales, mergers, demergers, acquisitions, large credit approvals, and major investments related to client companies. It is alleged that they placed trades using this privileged information, an act that could fall under insider trading violations.

This new development is separate from an ongoing probe into former top executives of the bank for allegedly trading in IndusInd Bank’s own shares while being aware of discrepancies in its currency derivatives portfolio.

Whistleblower Complaint Triggers Probe

The insider trading allegations surfaced following a whistleblower complaint, which was brought to the bank’s board. Reportedly, up to six officials are under regulatory scrutiny, with their family members also possibly being examined for trades that may be connected.

Sources told The Economic Express that Sebi has gathered key evidence in the matter. The regulator initially requested information via email, then visited IndusInd Bank’s headquarters in April to collect documents, including whistleblower complaints and minutes of the Audit Committee Board (ACB).

It is alleged that despite law firms advising serious concerns about how UPSI was handled, the bank management chose not to report the matter to Sebi, instead seeking the opinion of an ex-judge who advised no such disclosure was needed.

Questionable Oversight and Possible Non-Compliance

Some bank executives reportedly made a smooth exit from the organization, while others remain employed. The failure to escalate these concerns internally and to Sebi may have serious implications. According to one regulatory source, the bank’s compliance officer could face penalties if it is found that the matter was deliberately withheld from the regulator.

A former regulatory official noted that Sebi could take 3–4 months to pass an interim order, depending on the available evidence and complexity of the case. With access to ACB minutes and trade data, the investigation may advance quickly.

Companies Involved in Trades

Among the companies whose shares were allegedly traded by the bank’s executives were Kolkata-based firms such as Kesoram Industries, Birla Tyres, Eveready Industries, and McLeod Russel. However, these companies are not under regulatory scrutiny themselves. The investigation is focused solely on the individuals within IndusInd Bank who may have exploited their access to inside information.

Sebi’s Larger Concern: UPSI Access in Banks

Sebi is increasingly concerned about the potential misuse of UPSI by banking professionals, who routinely have early access to sensitive financial and strategic information due to their role in corporate lending and advisory.

To combat this, Sebi is planning a crash course on insider trading awareness, targeted specifically at compliance officers, managing directors, CEOs, and independent board members of listed banks. The initiative aims to ensure that top management implements insider trading policies in both letter and spirit.

Conclusion

This latest investigation adds to the growing scrutiny on IndusInd Bank, which is already facing reputational challenges due to past accounting lapses and whistleblower allegations. As Sebi deepens its probe into these insider trading charges, the case underscores the importance of ethical governance and regulatory compliance in financial institutions.