How a simple bank request unearthed four IDFC First Bank staff's Rs 590-crore fraud

IDFC FIRST Bank informed exchanges that it had received a request from a Haryana government department for the closure of its account at a Chandigarh branch and transfer of funds to another bank.

• Rs 590 crore fraud detected in Haryana govt accounts at IDFC First Bank
• Bank suspends 4 employees, internal probe and recovery underway
• Haryana de-empanels IDFC First Bank, probe by Vigilance started

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A Rs 590-crore fraud involving Haryana government accounts at a Chandigarh branch of IDFC First Bank has triggered a political and administrative response, with the state government de-empanelling the lender for government business and ordering a probe.

The issue came to light after a Haryana government department requested closure of its account and transfer of funds to another bank. During the process, the bank found discrepancies between its recorded balances and those cited by the department. The mismatch was initially pegged at Rs 490 crore, with an additional Rs 100 crore later identified, taking the total to Rs 590 crore.

The private sector bank disclosed on Sunday that certain employees, along with external parties, were involved in fraudulent transactions linked to a specific set of Haryana government accounts. The lender clarified that the fraud was “confined to a specific group of government-linked accounts within the Haryana government operated through the said branch in Chandigarh” and did not affect other customers of the branch.

Addressing investors, the bank’s MD and CEO V Vaidyanathan said, “This is basically a case where debit instructions have come supposedly from the client, which our people -- which clearly, to us, indicate the fraudulent activity -- have passed the entries and have transferred the money to certain parties outside the bank from the client's account.”

“So, this looks to us, on the basis of the work we've done, clearly, a case of employee fraud. And also our internal fingerprints and our details are quite clear that external parties are also involved here,” he added, noting that the fraud involved physical cheque transactions and occurred due to the connivance of employees.

The bank has suspended four employees suspected of involvement and said senior management does not appear to be implicated at this stage. It has launched an internal investigation and plans to recover the funds through legal and disciplinary action.

Meanwhile, the Haryana Finance Department (Institutional Finance & Credit Control) has de-empanelled IDFC First Bank and AU Small Finance Bank from undertaking government business with immediate effect. All departments, boards, corporations and public sector undertakings have been directed to close accounts with the two banks and transfer funds to authorised banks until further notice.

Haryana Chief Minister Nayab Singh Saini assured the state assembly that the funds are secure and will be recovered.

“We have been proactive in catching this fraud... When some glitches were noted, we asked for statements, and those, too, did not match. Therefore, the government decided to transfer all the money to an authorised bank, with interest... IDFC First Bank wrote a letter to SEBI in its defence, saying an employee was at fault,” the Chief Minister said.

“We transferred the matter to the Anti-Corruption Bureau and Vigilance Department. The investigation is going on... the money is completely safe, and it will definitely come back. Appropriate action will be taken against those found guilty, and even the bank if it is at fault,” he added.

Saini said the government is treating the issue seriously. “The matter surfaced on social media recently, we have investigated the case till the ground level... I assure the House that all the money will come back... I can make any statement only after the investigation...,” he stated.

The matter has now been referred to the Anti-Corruption Bureau and the Vigilance Department, with investigations underway.