Key Points
IDFC First Bank has reported a ₹590-crore fraud at its Chandigarh branch involving Haryana government-linked accounts, with four employees suspended.
IDFC First Bank CEO V Vaidyanathan described the incident as “an older, traditional kind of fraud in connivance with employees,” carried out over months through forged cheque transactions.
Investigators are examining 391 suspect transactions across more than 170 accounts, and around ₹70 crore in deposits have been frozen. Haryana Chief Minister Nayab Singh Saini told the Assembly that nearly ₹556 crore, including interest, has been recovered within 24 hours.
IDFC First Bank, on 23 February 2026, disclosed a ₹590 crore fraud allegedly carried out through collusion between its employees and external parties in accounts held by the Haryana Government. The matter, confined to a specific branch in Chandigarh, has prompted police complaints, a forensic audit, suspension of staff and scrutiny by state authorities.
In a statement to the National Stock Exchange (NSE), the bank said, “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.”
The issue surfaced after discrepancies were observed when a state government department sought closure of its account and transfer of funds to another bank. The bank said that from 18 February 2026 onwards, multiple Haryana government entities engaged with it regarding their respective accounts, during which differences emerged between balances reflected in bank records and those recorded by the departments.
According to the bank, the aggregate amount under reconciliation across the identified accounts is approximately ₹590 crore. Of this, ₹490 crore was detected during balance confirmations, while ₹100 crore was identified through internal checks.
IDFC First Bank’s Managing Director and CEO V Vaidyanathan described the incident as “an older, traditional kind of fraud in connivance with employees,” executed through forged physical cheque transactions rather than digital transfers.
Explaining the modus operandi, he said cheques were presented at the branch, mostly by external parties, and cleared by employees who were allegedly in collusion. The funds were transferred to accounts outside the bank, many of which are now under scrutiny.
The fraud continued for several months before detection. It was not the bank but the Haryana government that first noticed anomalies. When one department reviewed the status of its fixed deposits, it found the account empty despite holding physical FD certificates. The matter was escalated in January 2026, and as more departments sought confirmation, discrepancies widened.
Investigators in Haryana have brought under the scanner at least 391 suspect transactions across over 170 accounts. Deposits totalling around ₹70 crore have been frozen, and efforts are underway to identify additional linked accounts. Several accounts under scrutiny reportedly belong to businessmen, real-estate firms and realtors across Chandigarh and Haryana.
The state government departments under examination include the Development and Panchayat Department, Urban Local Bodies Department, Municipal Corporation (Panchkula) and the Haryana State Pollution Control Board. The role of four senior IAS officers will also be examined, although investigators said there is currently no evidence of direct involvement of state officials.
The Haryana Police have asked suspended bank employees to join the investigation. One key suspect is reported to be untraceable and is thought to have left the country.
Chief Minister Nayab Singh Saini informed the State Assembly on 24 February 2026 that nearly ₹556 crore, including about ₹22 crore in interest, had been recovered within 24 hours. “The entire amount has been deposited back into our accounts,” he said, adding that the recovery was made promptly after the matter came to light.
Saini said the bank had informed the government that the incident primarily involved a specific branch and four to five employees of middle and lower ranks. He assured the House that anyone found guilty, whether bank employee, private individual or government official, would not be spared. The State’s Anti-Corruption Bureau is conducting an in-depth probe, and a committee headed by the Finance Secretary has been formed.
Following the fraud’s disclosure, the Haryana government de-empanelled IDFC First Bank and AU Small Finance Bank from undertaking government business with immediate effect until further orders. AU Small Finance Bank has denied wrongdoing.
IDFC First Bank has suspended four employees and filed a police complaint. It has appointed KPMG as an independent forensic auditor, with the report expected in four to five weeks. The bank has also sent recall requests to beneficiary banks to lien-mark balances in suspicious accounts and initiated recovery proceedings.
Vaidyanathan said the bank would recover about ₹35 crore from Employee Dishonesty Insurance. He added that despite taking provisions, the bank would remain profitable. “The bank is well capitalised and profitability is in positive territory. Despite this hit we will still be profitable,” he said, noting that quarterly profits are around ₹500 crore.
The Reserve Bank of India is monitoring developments. RBI Governor Sanjay Malhotra said there was “no systemic issue,” and both the bank and the regulator have emphasised that the incident does not indicate broader systemic risk.
The fraud disclosure triggered sharp market reaction. On Monday, shares of IDFC First Bank fell 19.99% to ₹66.85 on the BSE, hitting the lower circuit. The stock later closed, down 16.18% at ₹70.04. On the following day, the scrip traded broadly flat at ₹70.16 on the NSE by mid-morning, suggesting the initial panic selling had eased.
The bank clarified that the stock’s movement was driven by its fraud disclosure rather than any de-empanelment decision, stating that empanelment approvals are routine in its course of business.
The case has also raised questions about internal controls and audit oversight. While the bank said it has a defined governance framework, maker-checker systems and positive confirmation mechanisms for high-value transactions, these controls appear to have been bypassed through collusion.
In response, the bank plans to introduce explicit system-based confirmations for branch-based transactions exceeding predefined thresholds, requiring customer authorisation via app. It also intends to deploy AI for initial transaction checks before human verification of signatures.
With forensic findings awaited and investigations underway, both the bank and the Haryana government have indicated that accountability will be fixed once the probe concludes.
[DS]
Suggested Reading:
