IndusInd bank has initiated an internal audit review and launched a forensic investigation on Thursday after markets regulator, Securities and Exchange Board of India (Sebi), announced that it scrutinise possible "egregious violations" by the senior management of the bank, following revelations of an accounting fraud that has shaken the private sector lender.

Ashok Hinduja, chairman of the bank's promoter group IndusInd International Holdings Ltd (IIHL), expressed confidence in the leadership and the bank’s efforts to clean house.

“I express my continued, unequivocal trust in the chairman and board of directors of the Bank for their appropriate, swift actions in order to address discrepancies and attendant areas of concern,” Hinduja said in a statement on Thursday.

Hinduja described the development as a "new dawn with a sanitised slate”.

The shares of IndusInd Bank closed 1.82 per cent higher at Rs 785.10 apiece on the BSE, even as the benchmark index corrected by 0.79 per cent.

Earlier, Sebi Chairman Tuhin Kanta Pandey said that while the primary responsibility for overseeing the bank's operations lies with the Reserve Bank of India (RBI), the markets watchdog is examining if there have been any breaches of securities market laws.

“RBI is looking into whatever Sebi has to do in relation to… whatever Sebi’s remit is… Sebi is doing… If there are any egregious violations by anyone in their capacity, Sebi is looking into it,” Pandey told reporters on the sidelines of an Assocham event.

Later, Hinduja lauded the RBI for “addressing the issues in a very orderly manner with suitable guidance,” and praised the interim management’s "swift" action in initiating the clean-up, which he said would help restore trust in the institution.

The turmoil at IndusInd Bank escalated on Wednesday when its board announced suspicion of employee involvement in the fraud.

The board directed the bank to report the matter to appropriate investigative and regulatory bodies.

The fraud spans the derivatives and microfinance portfolio, along with issues in balance sheet disclosures — prompting concerns among investors and regulators alike.

IndusInd Bank reported a net loss of Rs 2,329 crore for the March quarter, primarily due to the recognition of discrepancies and employee frauds uncovered during internal reviews, reported the PTI.

Hinduja also reiterated IIHL’s commitment to support the bank with additional capital, if required. He also noted that the bank’s core business remains strong and its capital adequacy robust.