MC EXCLUSIVE IDFC First Bank CEO vows necessary action after Rs 590-crore fraud, says will fix issues

IDFC First Bank managing director and chief executive officer V Vaidyanathan.

IDFC First Bank managing director and chief executive officer V Vaidyanathan has described the Rs 590- crore fraud at the lender’s Chandigarh branch an isolated incident and the first major operational setback in a decade, as bank opens an investigation.

The bank will learn from the incident and make necessary changes, Vaidyanathan told Moneycontrol in an interview after the lender late on February 21 informed the exchanges about the unauthorised transaction, which accounts for almost a fourth of its annual net profit, in Haryana government accounts involving some of its employees. The fraud could involve “other individuals/entities/counterparties” and it has appointed KPMG to conduct a forensic audit, the bank said.

Assuring that governance remains intact, Vaidyanathan said investor such as Warburg Pincus continue to support the bank. Edited excerpts of the interview:

The discrepancy reported is almost a fourth of the bank’s annual net profit. What implication does it have for the bank's financials?

The bank’s profitability in terms of net interest margin is increasing and we expect the credit cost to come down this quarter. We had already guided this with last quarter call. We feel that we'll be able to absorb this.

Will you do all of it in March FY26 itself?

We can't comment on the timing because it depends on number of number of factors such as possible recovery or claim made. Much of it will also depend on the legal stand on the matter. So, we'll take a call depending on what we're advised.

You engaged a forensic auditor to assess the situation on what went wrong.

We have appointed KPMG to do an independent forensic audit and will get to the bottom of this expeditiously.

You also have on board marquee investors such as Warburg ADIA. How have are your investors reacted to this update? Have you started engaging with them?

They're on the board as well and they know the facts as any other board member. Investors have always supported us and told us that you build a good business, this moment will pass, let’s look ahead. They know us for over a decade, trust us and appreciate our capability to build long term businesses with good governance. Frankly, the bank Frankly, the bank always maintains good standing in the market, including good brand image. This is probably the first operational incident that has happened in 10 years. We will take necessary corrective actions on this. We will learn from this and we will fix the necessary issues.

The bank is poised for the next phase of growth. Is this a minor setback or a reset for the bank in terms of overhauling processes?

The bank is fundamentally on a very strong footing. If you see growth of deposits for the last seven years, I think it is quite good, its grown from Rs 38,000 crore at merger to now Rs 2.8 lakh crore. We give good customer experience, have a good brand image. So our long-term plan and story is totally intact. This particular incident that has happened to us, we were dealing with it, we learn from it. But the fundamental story of a good quality world-class bank franchise coming up in the country with a good return on equity of say 15 to 16 percent is certainly on the cards based on unit economics and core profit growth. We will learn from it and make the necessary improvements. The bank is in a strong shape overall.