IDFC First Bank share price slipped 20% on Monday after the private lender disclosed a suspected fraud amounting to ₹590 crore at its Chandigarh branch, raising concerns about the potential impact on its earnings.
The private lender disclosed that employees at its Chandigarh branch had carried out unauthorized transactions in accounts linked to the Haryana state government, creating a deposit balance discrepancy of approximately ₹590 crore.
In a conference call on February 23, IDFC First Bank’s management clarified that the incident was restricted to only the Chandigarh branch and did not involve any other locations across its network of over 1,000 branches. It said that the employees allegedly involved have been suspended, and police complaints have been filed.
Management said the initially identified amount stood at ₹490 crore, with an additional conservative estimate of ₹100 crore, taking the total estimated impact to ₹590 crore. “This figure is considered broadly accurate at present,” the bank said, adding that it has transparently communicated the outer limit of the exposure.
Here are key takeaways from the management’s concall:
Detection and Timeline
The issue first came to light after the Haryana government flagged discrepancies in account statements post February 18. Following this, the bank reconciled related accounts. Management emphasized that there was no system failure; alerts, SMS notifications and transaction statements were generated as per protocol.
The transactions were executed through cheque-based instruments and not via electronic channels, pointing to alleged employee collusion with third parties rather than a technology lapse.
Forensic Audit
To investigate the matter, IDFC First Bank has appointed KPMG to conduct a forensic audit, covering the entire chain of events. The process is expected to take 4–5 weeks. The review will verify facts, determine accountability and assess intent. The Board has taken cognisance of the issue and is acting in line with regulatory guidance.
Recovery Actions
IDFC First Bank’s management said that the recovery efforts are underway. The bank said funds were transferred to multiple other banks, which have been cooperative in the process. It is analysing the case across various scenarios to identify funds not legitimately disbursed and expects further recoveries.
Financial Impact
On the financial front, management maintained that the bank remains well-capitalised, with a liquidity coverage ratio of around 115% and capital adequacy above regulatory norms. It said that the core operations remain strong, though the bank may take appropriate provisions.
The management informed that Haryana-related deposits account for roughly 0.5% of total deposits, while overall government deposits typically comprise 8–10%.
The private lender also holds an employee dishonesty insurance policy of about ₹35 crore.
Despite the setback, management reiterated confidence in core operations, guided for net interest margins of around 5.8% for the current quarter, and described the incident as a one-off branch-level event.
At 12:50 PM, IDFC First Bank share price was trading 15.68% lower at ₹70.46 apiece on the BSE.
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