CHANDIGARH: An internal review at a Chandigarh branch uncovered irregularities in government-linked accounts, prompting suspensions, a forensic audit and swift action from the state government.
A Fraud Comes to Light
The disclosure began with a regulatory filing. IDFC First Bank said that a preliminary internal review had found that unauthorized and fraudulent activities were confined to “a specific group of government-linked accounts within Haryana Government” operated through its Chandigarh branch. The matter, the bank emphasized, did not extend to other customers of the branch.
The aggregate amount under reconciliation across the identified accounts is approximately ₹590 crore, according to the bank. The figure, described as an estimate pending further validation, has placed one of India’s prominent private lenders under scrutiny.
In its filing, the bank said that “prima facie” irregularities had been carried out by certain employees at the branch and could potentially involve other individuals or counterparties. The disclosure followed discrepancies that surfaced when a Haryana government department requested the closure and transfer of its accounts to another bank.
During that process, the bank said, differences were observed between the amounts mentioned and the balances reflected in the accounts. Similar issues emerged in other government-linked accounts from February 18 onward. The bank’s shares closed 0.72 percent higher at ₹83.56 on the Bombay Stock Exchange on Friday, compared with a 0.38 percent gain in the benchmark index.
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Internal Action and External Oversight
Four bank officials have been suspended pending investigation. The lender said it would pursue strict disciplinary, civil and criminal action against employees and external individuals found responsible.
As part of its recovery efforts, the bank has issued what it described as a “recall request” to certain beneficiary banks to lien-mark balances in suspicious accounts — a step aimed at preserving funds while the investigation proceeds.
Statutory auditors have been informed. An independent external agency is set to conduct a forensic audit. The matter was placed before a Special Committee of the Board for Monitoring and Follow-Up of Cases of Frauds on February 20, with the audit committee and board apprised a day later.
The bank said a reconciliation exercise would determine the final amount involved based on additional information, validation of claims and recoveries of any nature.
Lapses in Deposit Instructions
The Haryana Finance Department, in a separate communication, flagged lapses in adherence to fixed deposit instructions. It noted that in several cases, funds meant to be placed in flexible deposits or higher-interest fixed deposit instruments were allegedly retained in savings accounts. The result, the department said, was lower returns and financial loss to the government.
In response, departments, corporations, boards and public sector undertakings were directed to strictly follow approved deposit terms, regularly verify compliance by banks, conduct monthly reconciliations of fixed deposits and related accounts, and report discrepancies to the Finance Department. All reconciliations must be completed by March 31, 2026, with a certified compliance report to be submitted by April 4, 2026.
A Swift Government Response
On Sunday, the Haryana government de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect, following the disclosure of the alleged ₹590-crore fraud involving accounts linked to the state government.
In an official circular, the state government barred the two banks from handling government business in Haryana until further orders. No government funds will be parked, deposited, invested or transacted through these banks going forward, the circular said. All departments and organizations were directed to immediately transfer balances and close accounts maintained with them.
