How a balance mismatch exposed a Rs 590 crore suspected fraud at IDFC First Bank

A routine account-closure request from a Haryana government department has led IDFC First Bank to uncover what could be one of its most serious fraud cases.

What began as a mismatch in account balances at one of IDFC First Bank’s Chandigarh branches has uncovered suspected irregularities of around ₹590 crore in accounts linked to the Haryana government. The issue has triggered a sharp fall in the bank’s shares, an independent audit, multiple internal meetings at the highest levels of the bank, and a response from the Reserve Bank of India (RBI).

How the issue surfaced

When a Haryana government department decided to close one of its bank accounts and transfer the money elsewhere, officials expected a routine process. Instead, they found that the balance shown in the bank’s records did not match their own figures.

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In the days following February 18, several other Haryana government entities approached the bank with similar concerns, each reporting balances that did not match the figures in the bank’s system. A preliminary internal review found that the irregularities were concentrated in a specific cluster of Haryana government-linked accounts at the bank’s Chandigarh branch.

The suspected amount under review is approximately ₹590 crore, though the bank said the final impact will depend on recoveries, insurance, validation of claims and legal processes.

What happened to the money?

According to the bank, the suspected fraud involves money being withdrawn or transferred without proper authorisation from certain government accounts. Early findings suggest the issue may be linked to forged paper cheques and improper manual handling of transactions, rather than a cyberattack or hacking incident.

The amount under scrutiny is around ₹590 crore, though the final figure will depend on the outcome of the investigation. The bank has said there are initial signs that some employees may have been involved. Four employees have been suspended, and a police complaint has been filed. “The bank will pursue strict disciplinary, civil and criminal action against the employees and other external individuals responsible, in accordance with applicable law,” it said.

In a regulatory filing, the bank said: “Prima facie, unauthorised and fraudulent activities have been carried out by certain employees at a particular branch in Chandigarh in a specific set of Haryana state government accounts and potentially involving other individuals/entities/counterparties.”

Market impact

After the suspected fraud was disclosed, IDFC First Bank’s shares fell sharply, reflecting investor worries about internal controls and possible financial losses. The RBI has said it does not see any wider risk to the banking system at this stage, indicating that the issue appears limited to a specific branch and set of accounts.

Bank’s response

The bank has appointed KPMG to carry out an independent forensic audit to find out exactly what happened and who was responsible. It has also asked other banks to freeze or hold funds in accounts where the money may have been transferred, in an effort to prevent further movement of the suspected amounts.

Also read | Rs 590 cr fraud | IDFC First Bank, AU Small Finance Bank de-empanelled for govt business in Haryana

Senior management has described the incident as unauthorised actions by certain employees, possibly working with outside individuals.

Govt action

The Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect till further orders, according to an official circular. No government funds will be parked, deposited, invested or transacted through these institutions, it said.

"IDFC First Bank and AU Small Finance Bank are hereby de-empanelled for government business in Haryana with immediate effect till further orders," according to a circular issued by the Finance Department.

Police are examining the complaint filed by the bank, while the RBI continues to monitor the situation as the inquiry moves forward.