A routine account-closure request from a Haryana government department has triggered one of the most serious fraud investigations ever reported by IDFC First Bank.
What began as a simple balance check has now expanded into a Rs 590-crore reconciliation exercise, a regulatory disclosure, multiple internal meetings at the highest levels of the bank, and a sharp selloff in the lender’s stock.
THE RED FLAG THAT STARTED IT ALL
The first alert came when a Haryana department asked the bank to shut its account and transfer the funds elsewhere. While processing that request, the bank realised the amount recorded by the department did not match the balance reflected in its own books.
That single discrepancy prompted a deeper internal check.
Over the next few days, starting February 18, several more Haryana government entities approached the bank with similar concerns. Each one claimed balances that differed from what the bank’s system showed.
A preliminary internal assessment revealed that the irregularities were concentrated within a specific cluster of Haryana government-linked accounts at the bank’s Chandigarh branch.
According to the formal disclosure filed with stock exchanges, the bank believes the issue does not extend to other customers of the branch.
The suspected amount under reconciliation is approximately Rs 590 crore, though the bank has said the final impact will depend on recoveries, insurance, validation of claims and legal processes.
Despite the bank’s immediate attempt to contain the situation, investors reacted sharply once the exchanges published the disclosure. Shares of IDFC First Bank plunged nearly 20% on the Bombay Stock Exchange.
The sudden slide reflected intense concern over governance lapses, the involvement of government accounts and the size of the suspected fraud.
For a lender that has spent the last few years positioning itself as disciplined and tightly governed, the breach hit reputationally as much as financially.
WHAT ACTION HAS BEEN TAKEN?
In response, the bank suspended four employees linked to the irregularities and reported the matter to the Reserve Bank of India, law enforcement agencies and statutory authorities.
Its Special Committee for Monitoring and Follow-up of Frauds met on February 20, followed the next day by the Audit Committee and the full Board. The lender said it has appointed KPMG to carry out this independent forensic audit. It has also sent recall and lien-mark requests to other banks where suspicious beneficiary accounts have been identified.
On a call with analysts, senior management described the incident as involving unauthorised activity carried out by certain employees, potentially in collusion with external parties.
The bank reiterated that it remains well capitalised and said the ultimate financial hit will depend on how much money can be clawed back and what insurance covers.
The Haryana government has temporarily suspended all dealings with the bank during the investigation. Although the exposure is not large enough to threaten the bank’s stability, the optics of tampered public-sector accounts, forged instructions and manual overrides have kept scrutiny high.
As the investigation progresses, the central questions revolve around recoveries, accountability and whether the incident signals a deeper operational weakness.
For now, the bank maintains that the breach is contained. But a routine account request has turned into a full-scale governance test — and the story is still far from over.
