IDFC First Bank fraud: After an over 16% crash in the previous session, IDFC First bank share price rose 3% on Tuesday, February 24 after the lender said it had paid the entire principal and interest amount claimed by departments of the Haryana government, even as the investigation into the matter remains ongoing. The bank disclosed that the total payout stood at ₹583 crore, underscoring its commitment to customer-first principles and ethical banking practices.
In a regulatory filing, IDFC First Bank said it chose not to withhold payment despite the issue being under investigation, emphasising that standing by customers at critical moments is central to its operating philosophy.
“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,” the company said, adding that it gives customers the benefit of doubt in the event of differing interpretations.
The crash yesterday came after the lender disclosed that a ₹590 crore fraud had been detected at its Chandigarh branch, involving accounts linked to the Haryana government. The revelation, made over the weekend, rattled investor confidence and triggered sharp selling in the stock.
In intra-day deals today, the scrip jumped 3.1% to its day’s high of ₹72.27 on BSE. The stock ended 1.33% higher at ₹70.97
The bank had said the total discrepancy stood at ₹590 crore, of which ₹490 crore had already been identified through reconciliation, while an additional ₹100 crore was estimated based on preliminary findings. The disclosure prompted swift action from the Haryana government, which de-empanelled IDFC First Bank and AU Small Finance Bank from accepting fresh government deposits.
Bank highlights strong financial position
IDFC FIRST Bank said the payment decision was driven by principle-based governance rather than procedural delays. “Now was the occasion to stand up and deliver when it truly matters and put our CUSTOMER FIRST principles in action,” the bank stated, adding that it did not hold back the payment despite the matter being under investigation.
At the same time, the bank reiterated that it would continue to cooperate with the concerned government departments and law enforcement agencies to pursue action against those responsible for the fraud and to recover its dues.
IDFC First Bank reiterated that it remains financially strong despite the ongoing investigation. As of December 31, 2025, the bank reported gross non-performing assets (GNPA) of 1.69% and net NPA of 0.53%, among the healthiest asset quality metrics in the sector. Its capital adequacy ratio stood at a comfortable 16.22%, providing adequate buffers for growth.
The bank’s total customer business, comprising loans and deposits, rose 22.6% year-on-year to ₹5,62,090 crore, while its CASA ratio was around 50%. Net interest margin came in at 5.76% in Q3FY26.
IDFC First Bank said profitability has not yet fully reflected these strengths as it continues to invest in products, technology, distribution, branches, ATMs and rural banking. The bank added that the foundation-building phase is largely complete and expects operating leverage to drive earnings growth, with profits returning to a strong trajectory from FY27 onwards.
Brokerages cut targets but stay constructive
Despite the sharp stock reaction in the previous session, brokerages said the incident appeared to be operational rather than structural, though near-term earnings and sentiment were likely to take a hit.
Axis Direct said, “While the fraud appears limited to a single branch and management does not expect any material escalation, near-term profitability will be impacted. We have cut FY26 earnings sharply, though we broadly maintain FY27–28 estimates, assuming no cascading impact from government-related business.”
Axis Direct reiterated its BUY recommendation on the stock, but revised its target price to ₹87 per share, implying an upside of 24% from the current market price. The brokerage now values the bank at 1.4x Sep-28E adjusted book value, compared with 1.6x earlier, factoring in a 23% cut to FY26 earnings. It believes valuations of 1.2x–1.1x FY27–28E adjusted book value are reasonable, though a meaningful re-rating would depend on flawless execution and stronger internal controls.
It added, “The outcome of the forensic audit will be closely watched, particularly for any spillover into other government accounts. While deposit growth remains largely granular and retail-driven, sustained confidence will hinge on strengthening internal processes alongside maintaining growth ahead of the system.”
Emkay, meanwhile, retained an ADD rating on IDFC First Bank but cut its target price by around 16% to ₹80, valuing the stock at 1.2x FY28E adjusted book value.
Emkay said, “The ₹5.9 billion mismatch represents about 1.25% of net worth and 0.2% of deposits. While this appears to be an isolated operational lapse, it could temporarily disrupt CASA momentum and delay near-term re-rating, though it does not derail the long-term RoA recovery story.”
Emkay noted that the fraud could lead to incremental outflows from Haryana government accounts, which account for around 0.5% of overall deposits, or roughly ₹14.5 billion. It also flagged potential second-order impacts on margins and business momentum, leading it to cut FY26, FY27, and FY28 earnings estimates by 30%, 13%, and 9%, respectively.
While brokerages broadly agreed that the incident was not comparable to a structural governance failure, they cautioned that investor confidence and valuation recovery would now hinge on the findings of the forensic audit, recovery progress, and the bank’s ability to reinforce internal controls without losing growth momentum.
IDFC First Bank fraud: What happened?
IDFC First Bank stated that, on a preliminary basis, unauthorised and fraudulent transactions appeared to have been carried out by certain employees at its Chandigarh branch, possibly in connivance with external parties. The irregularities were confined to a specific set of Haryana government-linked accounts maintained at that branch.
The issue surfaced after the bank received a request from a Haryana government department seeking closure of its account and transfer of funds to another bank. This prompted internal scrutiny, which revealed discrepancies across the identified accounts.
Managing Director and Chief Executive Officer V. Vaidyanathan described the episode as a clear case of employee fraud during a conference call, stating that internal evidence also pointed to the involvement of external parties. Four bank officials have been suspended pending investigation, and the matter was placed before the Special Committee of the Board for Monitoring and Follow-up of Cases of Fraud on February 20, 2026.
The bank has appointed KPMG to conduct a forensic audit, which is expected to take four to five weeks. Police complaints have been filed, law enforcement agencies have been engaged, and recovery and lien-marking actions have been initiated across the banking system.
Following the disclosure, the Haryana government issued a circular stating that no government funds would be parked, deposited, invested, or transacted through IDFC First Bank or AU Small Finance Bank until further orders.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
About The Author
