Staff Collusion Led to Haryana Govt Account Fraud, No Impact on Profitability: IDFC Bank

In a specially convened call for investors and analysts earlier in the day, V Vaidyanathan, managing director and chief executive officer at IDFC First Bank, said, “This matter pertains to a particular branch in Chandigarh and is confined to a limited set of Haryana government-linked accounts. The main issue which we have observed here is that certain employees of this branch, most possibly in connivance with external parties, have fraudulently transferred these amounts to beneficiaries who had accounts outside of our bank.”

“This is an isolated case. In the last 5 years, 7 years, we put up over 1,000 branches, cumulatively maybe over 1,050 or 1,060. And, we have really not seen any incident of this nature that has happened here,” he added.

The bank has pegged the discrepancy at around ₹590 crore, comprising ₹490 crore identified following reconciliation and an additional ₹100 crore that was “self-identified” through internal checks. The bank’s chief hinted that this amount of ₹590 crore is unlikely to increase. Recoveries and “employee dishonesty insurance” cover of ₹35 crore could reduce the impact on the bank, he said.

Vaidyanathan informed that the bank has appointed KPMG to conduct an independent forensic audit, which is expected to conclude in 4–5 weeks.

He said that the bank will make some provisions as a result of the fraud and in line with its policies to recognise any stress upfront. However, the same is unlikely to have a major impact on profits. “On a standalone basis, we were expecting a very solid Q4 in terms of profitability,” Vaidyanathan said.

However, to put things in perspective, the fraud amount of ₹590 crore exceeds the bank's entire Q3FY26 net profit of ₹503 crore and is nearly 40 per cent of its full-year FY25 net profit of ₹1,490 crore. Brokerage Investec downgraded the stock by 12.38 per cent to ₹92 against the earlier target of ₹105.

IDFC First Bank has no promoter holding as of the December quarter. Mutual funds own 10.9 per cent, insurance companies 10.8 per cent, and the government holds 7.75 per cent. Retail investors, those with authorised share capital of up to ₹2 lakh, hold 15.06 per cent, with 27.9 lakh shareholders on its register.

The bank said that it has filed police complaints, informed regulators and auditors, and initiated recovery and lien-marking actions across the banking system.

Vaidyanathan said deposits from the Haryana government account form about 0.5 per cent of the bank's total deposits, while overall government deposits, including central and state entities, constitute 8–10 per cent of the deposit base.

In the three months ended December 31, 2025, the bank reported a 24 per cent jump in deposits, including a 33 per cent rise in the share of the low-cost current and savings account deposits. Its net profit had zoomed 48 per cent to ₹503 crore for the October–December period.

Meanwhile, another lender, AU Small Finance Bank, which too has been de-empanelled by the Haryana government, denied any wrongdoing. It said that to ensure a fair and transparent review, certain employees have been placed off duty and it is also engaging with the Government of Haryana to assess the reasons for de-empanelment. AU Small Finance Bank said that there is no indication of any financial impact or any fraudulent activity in the wake of its de-empanelment from government business in Haryana.

The Haryana government had de-empanelled IDFC First Bank and AU Small Finance Bank for government business after the fraud at IDFC First Bank came to light.

“No government funds shall henceforth be parked, deposited, invested or transacted through these banks,” the Haryana government notification issued on February 18 had said. The new norms permit administrative secretaries to approve the opening of accounts for government schemes only in nationalised banks operating in the state, while opening accounts in private sector banks would require prior approval.