IDFC First Bank to implement new fraud controls to prevent unauthorised debits

IDFC First Bank

IDFC First Bank said on February 23 that it will implement an explicit system for high-value transactions that exceed a predefined threshold at branches, and will further take implicit confirmation from the customer, making the entire process mandatory.

In a conference call to analysts earlier in the day, IDFC First Bank CEO  V Vaidyanathan said that these measures will add an extra control layer to reduce the risk of unauthorised debits.

“The customer’s confirmation will be captured through a verified digital channel within a stipulated time window. If a high-value transaction needs to be cleared, the bank will not rely on a phone call. Instead, it will trigger an alert prompting the customer to log into the official banking app and explicitly approve the transaction,” Vaidyanathan said in response to an analyst’s question.

Additionally, he said that an AI system will also help in verifying signatures and other anomalies, and this will be followed by a  human confirmation.

“We will improvise upon that and put some new controls. But frankly, we definitely feel that the overall system at the bank is something that we will further enhance, based on the experiences from a recent incident,” Vaidyanathan said.

Rs 590 crore fraud

IDFC First Bank revealed that, over the weekend, it has identified a fraud of about Rs 590 crore, involving certain Haryana government-linked accounts operated through a branch in Chandigarh. Following this, the Haryana government de-empanelled its accounts from the bank, leading to an outflow of about Rs 200 crore.

The lender had further said an investigation has been initiated and has placed four officials under suspension till the probe is over. Furthermore, the bank has placed the matter before the Special Committee of the Board for Monitoring and Follow-up of Cases of Frauds. The bank has appointed KPMG for an independent forensic audit.

In an exclusive interview to Moneycontrol earlier in the day, Vaidyanathan said that the bank will learn from the incident and make necessary changes, after the investigation is complete.

IDFC First Bank reported a Rs 479 crore profit for the third quarter of the financial year -- a  41 percent rise from the corresponding quarter the previous year. It posted a revenue of Rs 10,417 crore -- an 11 percent rise from the corresponding quarter last fiscal.

Shares of IDFC First Bank were down nearly 16 percent on the BSE at 13:30 IST, trading at Rs 70.55 apiece.