How a simple account closure request exposed a Rs 590-crore fraud at IDFC First Bank
PTC Web Desk: A routine request to close a bank account has snowballed into a major fraud investigation at IDFC First Bank, involving nearly Rs 590 crore and triggering a sharp fall in the lender’s share price.
The issue surfaced when a Haryana government department asked the bank to close its account and transfer the remaining funds. During the process, officials noticed that the balance claimed by the department did not match the amount recorded in the bank’s system.
What initially appeared to be a simple mismatch soon raised serious concerns. Beginning February 18, more Haryana government-linked entities approached the bank with similar complaints. In each case, the balances they believed were in their accounts differed from what the bank’s records showed.
An internal review found that the irregularities were limited to a specific group of Haryana government-related accounts at the bank’s Chandigarh branch. In a disclosure to stock exchanges, the bank said that, based on its preliminary findings, other customers at the branch do not appear to be affected.
The amount currently under reconciliation is estimated at around Rs 590 crore. However, the bank has said the final financial impact will depend on recoveries, insurance claims, verification of transactions and legal proceedings.
After the disclosure became public, investors reacted strongly. Shares of IDFC First Bank fell nearly 20% on the Bombay Stock Exchange, reflecting concerns over internal controls and governance standards.
The development is seen as a setback for the bank, which in recent years has projected itself as a tightly managed and compliance-focused institution.
Steps taken by the bank
The bank has suspended four employees allegedly linked to the irregularities. It has also informed the Reserve Bank of India, law enforcement agencies and other regulatory authorities.
A Special Committee for Monitoring and Follow-up of Frauds met on February 20 to review the situation. The next day, the matter was discussed by the Audit Committee and the full Board.
The bank has appointed KPMG to conduct an independent forensic audit to examine the transactions and identify the extent of the irregularities. It has also issued recall notices and lien-mark requests to other banks where suspicious beneficiary accounts have been identified.
Senior management, in discussions with analysts, indicated that the issue involved unauthorised actions by certain employees, possibly in collusion with external parties.
The Haryana Government has temporarily suspended its dealings with the bank while the probe continues.
The bank has maintained that it remains financially stable and well-capitalised. It said the actual loss, if any, will depend on how much money can be recovered and what insurance coverage applies.
While the exposure is not considered large enough to threaten the bank’s survival, questions remain over accountability and internal checks. As investigations continue, attention will focus on recoveries, responsibility and whether the incident points to deeper operational gaps.
What started as a routine account closure has now become a serious test of governance for the bank, and the final outcome is yet to be known.
- With inputs from agencies
