IDFC First Bank Clarifies Status of ₹590 Crore “Isolated” Fraud

IDFC First Bank has sent shockwaves through the banking sector by uncovering a ₹590-crore fraud at its Chandigarh branch.

The discovery, made public on February 22, 2026, involves internal staff colluding with external parties to siphon funds from accounts belonging to the Haryana Government.

How the Mismatch at IDFC First Bank was Exposed

The discrepancy first came to light on February 18, 2026, when a department of the Haryana Government requested to close its account and transfer the balance to another bank.

During the process, the bank observed a massive difference between the department’s records and the actual account balance.

Following this, other Haryana government entities approached the bank, revealing similar gaps.

The bank initially identified a ₹490-crore exposure, which grew to ₹590 crore after a “self-identified” internal review of connected accounts.

Traditional Fraud in a Digital Age

According to MD and CEO V. Vaidyanathan, the fraud was not a sophisticated cyber-attack but a “traditional” collusion.

Bank employees allegedly used forged physical cheques and unauthorized manual debits to move money to third-party accounts in other banks.

By manipulating the system, the involved staff likely suppressed automated SMS and email alerts.

This interference prevented critical notifications from reaching the government officials.

The bank has clarified that this is an isolated incident involving one branch and one client group, ensuring no other retail or corporate customers are affected.

Swift Disciplinary and Legal Action

In response, IDFC First Bank has taken several immediate steps:

• Suspensions: Four employees have been placed under suspension.
• Forensic Audit: Global advisory firm KPMG has been appointed to conduct a forensic audit, expected to finish in four to five weeks.
• Police Action: A formal police complaint has been filed to initiate criminal proceedings.
• Fund Recovery: The bank has requested other “beneficiary banks” to mark a lien on suspicious accounts to freeze the remaining funds.

IDFC First Bank Financial Fallout and State Response

While the bank remains well-capitalized, the fraud will impact its quarterly profitability, with provisions likely to be taken in the current quarter.

In a swift reaction, the Haryana Government has de-empanelled IDFC First Bank. This move bars all state departments from conducting further transactions with the lender.

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