Winning Bizness Desk
Mumbai. Shares of IDFC First Bank tumbled sharply on February 23, closing 16% lower at Rs 70.09 after a Rs 590 crore fraud surfaced at its Chandigarh branch. The alleged fraud involves unauthorised transactions in bank accounts linked to institutions of the Haryana government. The scale of the irregularity has rattled investors, as the amount exceeds the bank’s reported third-quarter profit of Rs 503 crore.
Fraud amount exceeds quarterly profit
The magnitude of the fraud is higher than the bank’s net profit for the December quarter, underlining the seriousness of the episode. Addressing a joint press conference with Finance Minister Nirmala Sitharaman, RBI Governor Sanjay Malhotra said the central bank is closely monitoring developments and that there is no systemic concern at present. The reassurance, however, did little to calm market nerves during the trading session.
Bank suspends four officials, orders probe
Soon after the matter came to light, the bank suspended four officials of its Chandigarh branch with immediate effect. A police complaint has also been filed. To conduct a detailed and independent probe, the bank has appointed KPMG as a forensic investigator. The management said the exercise will examine transaction trails, internal approvals and possible lapses.
Key steps taken so far include:
Irregularities flagged during account closure request
The issue surfaced when a department of the Haryana government requested closure of its account and transfer of funds to another bank. During the process, discrepancies were noticed between the balance in the account and the amount stated by the department. From February 18, 2026, other Haryana government-linked institutions also approached the bank regarding their accounts, and similar mismatches were detected.
Preliminary internal findings suggest that the irregularities are confined to specific Haryana government-linked accounts operated from the Chandigarh branch. Other customers of the branch are not believed to be affected.
CEO terms it internal collusion case
Managing Director and CEO V Vaidyanathan described the matter as one of internal collusion rather than a structural or system-level weakness. He said the bank has strong maker-checker-authoriser controls in place and that such an incident has not occurred in its 10-year history across more than 1,000 branches.
On the recovery front, the bank has issued recall notices to other banks where the suspected fraud amount may have been transferred. It expects partial recovery through this process.
Brokerages flag profit impact, rating trimmed
Global brokerage UBS has estimated that the fraud amounts to nearly 22% of the bank’s projected profit for FY2026. Morgan Stanley has pegged the impact at about 20% of pre-tax profit. Investec has retained its buy rating but cut the target price from Rs 105 to Rs 92, cautioning that the stock may remain under pressure until the forensic audit concludes.
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