Why IndusInd Bank plans to recover salaries of ex-top executives
What's the story
IndusInd Bank has initiated a process to reclaim the salaries and bonuses of its former CEO Sumant Kathpalia and Deputy CEO Arun Khurana. The move comes after an internal review flagged misconduct and misreporting on their part. The bank's decision is in line with Indian banking regulations that permit clawback provisions in employee contracts since 2019. However, such actions have been rare, with just two known instances since the regulations were introduced.
Financial discrepancies
Derivative trade losses prompt executive exits
Earlier this year, IndusInd Bank reported a $230 million hit due to incorrect accounting on derivative trades. The incident led to the exit of Kathpalia and Khurana in May. Both former executives are now being investigated by the Indian markets regulator and enforcement authorities over allegations of insider trading and accounting irregularities.
Legal proceedings
Legal opinion sought on employee accountability
The board of IndusInd Bank has sought a legal opinion on holding staff accountable, based on its own internal code of conduct and Reserve Bank of India (RBI) guidelines. The board considers the matter as one of "accounting misstatements, regulatory sanction, failure of internal controls and failing to ensure compliance." Such acts are viewed as misconduct that warrants disciplinary action under the bank's publicly available code of conduct.
Clawback details
Clawback period and executives' fixed pay details
The clawback by IndusInd Bank could cover the period between December 2023 and March 2025. However, the exact amount of clawback or if other officials will be subject to such action remains unclear. The company's annual report for the fiscal year ending March 2025 showed Kathpalia's total fixed pay at ₹75 crore and Khurana's at ₹50 crore.
Ongoing investigations
Regulatory action and bank's internal overhaul
Kathpalia and Khurana also face regulatory action by the Securities and Exchange Board of India (SEBI), which barred them from securities markets in May pending an investigation into allegations of insider trading. The new CEO of IndusInd Bank recently revealed that the bank is conducting an internal accountability exercise, and plans to complete an organizational overhaul before the new fiscal year starts on April 1, 2026.