How the IDFC First Bank scam unfolded: From employees in dock for ₹590 crore fraud, timeline of events to what's ahead

IDFC First Bank has suspended four employees at a branch in Chandigarh for suspected involvement in a ₹590 crore fraud targeting bank accounts linked to the Haryana state government. In a filing with the exchanges on Saturday, the bank said its internal assessment found that certain employees conducted fraudulent activities, with potential involvement by other individuals or entities.

PTI on Sunday reported that the Haryana government's Finance Department issued a circular notifying that IDFC First Bank and AU Small Finance Bank have been de-empanelled for all government business — such as holding funds (savings), deposits, investments or transactions — with immediate effect till further notice.

The same day, AU Small Finance Bank issued a clarification stating that it has “initiated an internal review” on the matter, but stated that 14 transactions worth ₹47 crore from the government account to a customer account were conducted “in the normal course of business”.

Amid emerging information and clarifications, we trace the timeline of events — from employees in the dock for ₹590 crore fraud, the ₹47 crore funds transfer, steps taken so far, to what's ahead.

Watch: IDFC First Bank Share Crashes 20% After ₹590 Crore Fraud Linked To Haryana Govt Accounts

How the IDFC First Bank scam unfolded — a timeline

• According to IDFC First Bank, it received a request from a Haryana government department for closure of its account and transfer of funds to another bank and in the process, “certain discrepancy was observed in the amount mentioned vis-à-vis the balance in the account”.
• AU Small Finance Bank, in its filing, stated that it closed a government account on 15 January, based on instructions from the department concerned and the outstanding balance of ₹25 crore, along with accrued interest, was transferred back to the original large private sector bank.

• Later, it received a communication dated 16 February from the department, seeking account opening and transaction details regarding a specific account.
• IDFC First Bank added that from 18 February onwards, other Haryana government entities engaged with the bank with respect to their accounts, observed differences "between the balances in the account and the balances as mentioned by the said government entities”.
• It conducted a preliminary internal review, which determined “the matter is confined to a specific group of government-linked accounts within the Haryana government operated through the said branch in Chandigarh and does not extend to other customers”.

• According to the bank, around ₹590 crore is “under reconciliation across the identified accounts”, and the impact will be determined based on further information, validation of claims, and recoveries of any nature.
• The four suspected officials are placed under suspension pending investigation. The bank said that it will “pursue strict disciplinary, civil and criminal action against the employees and other external individuals responsible, in accordance with applicable law”.
• AU Small Finance Bank added that on 18 February, it also received a separate communication from the department seeking information regarding suspected unauthorised transactions between the government account and a customer account with the bank.
• The same day, the Haryana government's Finance Department communicated to the bank about its de‑empanelment for government business in the state, as per a PTI report.

• On 20 February, IDFC First Bank said it called for a meeting of the Special Committee of the Board for Monitoring and Follow-up of Cases of Frauds (SCBMF) and the matter was placed before the Committee.
• On 21 February, a meeting of the Audit Committee and the Board of Directors was convened to apprise them of the matter.
• In the call, IDFC First added that it had a discussion with employees on 22 February but emphasised that the bank “is in full control”. It added that this was a traditional fraud, but “this is about individuals and not (the banking) system”.

Police report filed, audit commissioned — what's ahead?

IDFC First, in its filing, noted that its regulator (the Reserve Bank of India) has been informed of the matter, and a police complaint has been filed. It added that it is also in the process of filing further complaints with appropriate law enforcement agencies and reporting to relevant authorities. It added that “full cooperation” will be extended to the investigating agencies.

On 23 February, the bank's management in a conference call said the board has taken cognisance of the issue and is acting in line with regulatory guidance. It has appointed KPMG as the independent external agency to conduct an independent forensic audit into the matter. The review will verify facts, determine accountability and assess intent, and is expected to take four to five weeks.

Haryana Chief Minister Nayab Singh Saini on Monday told reporters that the state's Anti-Corruption Bureau (ACB) will conduct an in-depth investigation into the matter, as per a PTI report. He added that a high-level committee, comprising IAS officers, will also be formed to conduct a probe, it added.

Speaking to reporters after the state assembly where he assured the House that a probe has been ordered, the CM said, “We have handed over the matter to Anti-Corruption Bureau and a case has been registered.”

On 23 February, RBI Governor Sanjay Malhotra told reporters after the regulator's Central Board of Directors meeting that it is “watching the development” and assured that “there is no systemic issue”, as per the PTI report.

Also answering questions after the meeting, Union Finance Minister Nirmala Sitharaman reiterated that there is “no systemic kind of issue” with IDFC First Bank, and that as a matter of policy, the government does not comment on individual companies, it added.

What does Haryana govt de-empanelment mean for banks?

The Haryana government circular, dated 18 February, said no government funds shall henceforth be parked, deposited, invested, or transacted through IDFC First or AU Small Finance banks, PTI reported.

It directed all relevant departments/organisations to take immediate action to transfer the balance and closure of accounts maintained with these banks.

It also directed all departments, corporations, boards, and public sector utilities (PSUs) to: ensure that fixed deposits (FDs) are placed strictly in accordance with the approved terms and conditions; and complete the process in all respects by 31 March.

A compliance report, duly certified by the competent authority, is to be submitted to the Finance Department by 4 April.