IndusInd Bank Moves to Recover Executive Compensation
IndusInd Bank in India has initiated efforts to reclaim salaries and bonuses from its former CEO and deputy CEO following findings from an internal investigation that revealed fraud and misrepresentation, according to a source familiar with the situation.
Since 2019, Indian banking regulations have permitted clawback clauses in employee contracts to combat fraud. However, while employees can dispute these actions legally, such instances are infrequent, with only two known cases since the regulation was introduced.
This year, the bank disclosed accounting inaccuracies tied to derivative transactions, which resulted in a $230 million loss and ultimately led to the exit of former CEO Sumant Kasparia and deputy CEO Arun Khurana in May.
Both executives are currently under investigation by India’s market regulator and enforcement agencies for suspected insider trading and accounting fraud.
Khurana chose not to comment when approached by Reuters, stating he had no information on the subject. Kasparia did not reply to messages or emails seeking comment, and the bank also did not respond to inquiries.
Legal Opinions Garnered by Bank’s Board
According to another source, IndusInd Bank’s board has sought legal advice regarding holding its staff accountable based on the internal code of conduct and guidelines from the Reserve Bank of India (RBI). The board views this situation as involving “accounting misstatements, regulatory sanctions, internal control deficiencies, and failure to ensure compliance,” which have led to rule violations and subsequent harm to the institution.
The bank’s published code of conduct classifies these actions as “illegal acts necessitating disciplinary measures.”
The clawback could apply from December 2023 to March 2025, the official noted. However, it remains unclear how much is being reclaimed or if additional officials might face similar actions.
Kasparia’s total fixed salary was reported to be 750 million Indian rupees (about $8.53 million), and he exercised 248,000 stock options, based on the company’s annual report for the fiscal year ending in March 2025. Khurana’s fixed salary was 500 million rupees.
Regulatory Scrutiny Over Insider Trading Claims
Additionally, both executives are facing regulatory measures from the Securities and Exchange Board of India (SEBI), which imposed a market ban on them in May while an investigation into insider trading allegations is underway.
The bank’s new chief informed Reuters this month that an internal accountability assessment is being conducted, aiming to finalize a review of the organization by April 1, coinciding with the start of the new financial year.
Moreover, private sector financial institutions are also forming internal committees to enhance financial systems and controls.
