IDFC First Bank pays ₹583 cr to Haryana govt after detecting fraud

IDFC First Bank refunds Rs 583 crore to Haryana government after detecting a Rs 590-crore fraud, engages KPMG for a forensic audit and works with authorities on recovery

IDFC First Bank said on Tuesday that it has paid the entire principal and interest, amounting to ₹583 crore, to relevant departments of the Haryana government.

 

And, it is working with state authorities and law-enforcement agencies to pursue action against the perpetrators of a fraud and recover the dues.

 

According to the bank, preliminary findings indicate that certain employees of the branch acted fraudulently in clearing forged instruments and payment instructions, potentially in collusion with external parties. 

 

The bank’s shares recovered following the refund announcement, after tanking over 16 per cent on Monday.

 

Its shares closed 1.33 per cent higher on the BSE at ₹70.97, even as the broader markets fell 1.28 per cent on the day. 

 

 

“…even though the investigation in the matter is ongoing, we have paid 100 per cent of the principal and interest to relevant departments of the Haryana government as claimed. This works out to a net amount of ₹583 crore,” it said in an exchange filing.

 

The bank added, “We are building a world-class bank in India with strong governance and ethics and will emerge stronger from this incident.” 

 

Over the weekend, the bank reported a ₹590-crore fraud at a Chandigarh branch that handled Haryana government accounts. The fraud was discovered after a government department sought to close its account with the bank and transfer the funds to another lender. However, the amount mentioned by the department did not match the balance in the account.

 

IDFC First’s management classified this as an “isolated” incident arising from alleged collusion between its employees and external parties, with funds transferred to beneficiaries outside the bank.

 

The employees have been suspended and the bank has engaged KPMG to conduct a forensic audit. KPMG is expected to submit its report in the next four-five weeks.

 

“Our bank always upholds the highest principles and standards. We call ourselves a customer-first bank in the way we define our product policies, disclosures, and no fine print banking. We give benefit of doubt to customers in the event of difference of opinion,” the bank said in its disclosure to exchanges.

 

“Now was the occasion to stand up and deliver when it truly matters and put our customer-first principles in action. We are a principle-based bank, and we mean it. We did not hold up the payment on account of the matter being under investigation. This is the DNA of IDFC First Bank,” the lender said.

 

According to a report by Motilal Oswal, the financial impact of this incident on the bank will depend on the quantum and timing of recoveries as determined by the findings of the ongoing forensic audit and subsequent legal recovery process.

 

“We believe that in a worst-case scenario assuming negligible recovery, the provisioning requirement will impact Q4FY26 profit before tax by 56 per cent,” the brokerage said in a report.

 

Additionally, Emkay has cut the bank’s FY26, FY27, and FY28 growth guidance, to factor in a provision for fraud in FY26 and second-order business/margin impact over FY27-28.

 

“Although not a structural governance issue like IndusInd Bank (that led to a churn in the top management), the operational lapse may delay IDFC Bank’s near-term rerating story, but not derail it,” the brokerage added in a note.