The suspected fraud at IDFC First Bank’s Chandigarh branch, disclosed on 22 February, sent the lender’s shares tumbling as much as 18% by 24 February. Even as the Reserve Bank of India (RBI) has assured there is no systemic risk and the Haryana government has de-empanelled the bank for fresh deposits, Mint examines what the episode means for the Warburg Pincus-backed lender.
What is the fraud?
IDFC First Bank disclosed on Sunday a suspected ₹590-crore fraud at its Chandigarh branch, involving a set of Haryana government-linked accounts.
Certain branch employees, “most possibly in connivance with external parties”, fraudulently transferred funds to beneficiaries holding accounts outside the bank, it said.
Managing director and chief executive V. Vaidyanathan described it as “clearly a case of employee fraud”, adding that evidence also points to external involvement.
The discrepancy includes ₹490 crore identified through reconciliation and an additional ₹100 crore estimated by the bank. Mint reported on 23 February that the bank is probing whether the documents—authorization letters and cheques—used to transfer and withdraw funds were genuine or forged.
What is the financial impact?
The lender has sought to reassure investors that the impact is manageable. Haryana government deposits account for roughly 0.5% of the bank’s total deposits, while state and central government deposits together account for 8-10%. As of December-end, customer deposits stood at ₹2.82 trillion, up 24% year-on-year. Around ₹200 crore has already flowed out following the disclosure and the state’s decision to halt fresh dealings.
Though the value of the suspected fraud is close to the bank's December-quarter profit of ₹503 crore, management expects to remain profitable in the March quarter even if the fraud amount is recognized in the profit and loss statement—aided by improving net interest margins of around 5.8% and moderating credit costs.
The bank has paid ₹583 crore to the relevant departments of the Haryana government, even as the probe continues, it said on 24 February.
Will this lead to greater scrutiny of private banks?
Analysts believe the episode could trigger tighter oversight of government deposits held with private-sector banks, and some deposits could move to state-owned banks over the medium term.
RBI governor Sanjay Malhotra said the central bank is closely monitoring the situation and emphasized there is no systemic issue.
While this seems to be an isolated operational lapse, the incident could trigger incremental outflows from the Haryana government for the bank amounting to ₹1,450 crore, 0.5% of overall deposits and partly from other government accounts, which could hurt the bank’s near-term current account and savings account deposits and margin recovery, Emkay Global Financial Services said in a 23 February note.
What steps have the bank and the Haryana government taken?
The bank has appointed professional services firm KPMG to conduct a forensic audit, which could take four to five weeks. All suspected employees have been suspended, police complaints filed, and recovery and lien-marking actions initiated across the banking system. “The money has gone to many other banks… and they’re all highly cooperative,” the management said in a conference call on 23 February.
If multiple parties are found to be involved, the bank will pursue appropriate legal action and, in the event of any liability attributable to the bank, it will honour and repay the obligation accordingly.
Meanwhile, the Haryana government has de-empanelled the bank and AU Small Finance Bank for parking fresh deposits and initiated its own review of transactions linked to the affected accounts.
How have other banking frauds led to deposit outflows?
Recent cases show that frauds often dent depositor confidence and trigger outflows. According to Emkay Global, IndusInd Bank’s ₹1,960 crore discrepancy in March 2025 due to an internal accounting mismatch led to a reported ₹3,350 crore decline in retail and small business deposits in the March quarter. In February 2025, the RBI capped withdrawals after cash discrepancies of ₹122 crore at New India Cooperative Bank Ltd. Similar staff-linked deposit frauds were reported at ICICI Bank and Equitas Small Finance Bank, though on a smaller scale.