Mumbai: The Rs 590 crore discrepancy involving Haryana government accounts was caused by collusion between employees of IDFC First Bank and external parties, according to Managing Director and CEO V Vaidyanathan.

The bank said the incident involved forged physical cheque transactions linked to a specific branch and client group. Officials stated that there was no systemic reporting error and that the issue was confined to limited operational activity.

Fraud investigation and audit

IDFC First Bank has initiated a forensic audit through KPMG, which is expected to be completed within four to five weeks.

The bank has reported the matter to law enforcement authorities, regulators and auditors, and has begun recovery and lien-marking actions across the banking system.

Management indicated that the discrepancy includes Rs 490 crore identified through reconciliation and an additional Rs 100 crore discovered through internal checks.

Financial impact and provisions

The bank said it will make provisions in line with its accounting policies but expects limited impact on profitability. Factors supporting financial stability include strong net interest margins and controlled credit costs.

Recoveries and employee dishonesty insurance coverage of approximately Rs 35 crore could partially offset losses.

Deposits from the Haryana government account represent about 0.5% of the bank’s total deposits. Including other government entities, public sector deposits account for roughly 8–10% of the bank’s deposit base.

Market reaction

Shares of IDFC First Bank were trading lower on the stock market following the disclosure of the fraud-related discrepancy.

The Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank from government business. AU Small Finance Bank has denied any wrongdoing. The bank has filed police complaints and informed financial regulators regarding the alleged fraudulent transactions.

The independent forensic audit by KPMG is expected to provide detailed findings on the incident. While the Rs 590 crore discrepancy has raised concerns, the bank management believes the issue is contained and that operational safeguards and insurance mechanisms will help limit financial damage. Further developments will depend on the forensic audit outcome.
(With PTI inputs)