IDFC First Bank shares fall up to 20% as lender discloses Rs 590-crore fraud by employees

IDFC First Bank shares fall 15% as lender discloses Rs 590-crore fraud by employees

• IDFC First Bank shares drop 15% after Rs 590 crore fraud revealed
• Fraud linked to employees and Haryana govt accounts in Chandigarh
• Four officials suspended; police and regulator notified

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IDFC First Bank shares fell up to 20% on February 23 a day after the lender disclosed a Rs 590-crore fraud committed by its employees and others in accounts held by the Haryana government with the private sector lender.

IDFC First Bank said it has disclosed the matter to the banking regulator and also filed a police complaint.

On February 23, IDFC First Bank shares closed trading 16% lower at Rs 70.09 apiece after hitting 20% lower circuit on intraday basis.

The amount under reconciliation is equivalent to roughly 0.9% of the bank's net worth and about 20% of its fiscal 2026 pre-tax profit, according to brokerage estimates.

UBS estimated the suspected amount at about 22% of IDFC First's fiscal 2026 profit after tax, though it said the capital impact would be limited to around 1% of the bank's net worth.

Morgan Stanley echoed the view, pegging the potential hit to fiscal 2026 profit before tax at roughly 20%.

Jefferies said the lender will have to reassure investors that the issue had not spread to other clients and that the matter did not appear to be systemic.

"Prima facie, unauthorised and fraudulent activities have been carried out by certain employees at a particular branch in Chandigarh in a specific set of Haryana state government accounts and potentially involving other individuals/entities/counterparties," the IDFC First Bank filing said.

At present, it estimated the fraud size at Rs 590 crore and added that a "reconciliation exercise" will determine the final amount based on receipt of further information, validation of claims, and recoveries of any nature.

Meanwhile, the Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect till further orders, according to an official circular.

No government funds will be parked, deposited, invested or transacted through these institutions, it said.

"IDFC First Bank and AU Small Finance Bank are hereby de-empanelled for government business in Haryana with immediate effect till further orders," according to a circular issued by the Finance Department.

Providing details of the fraud, it said a Haryana government department had been banking with IDFC First Bank, and the lender received a request for a closure and balance transfer to another bank on an undisclosed date.

"In the process, certain discrepancies were observed in the amount mentioned vis-a -vis the balance in the account," it said, adding that similar issues were observed in other accounts of Haryana government entities, who engaged with the bank from February 18 onwards.

IDFC First Bank said that a preliminary internal review was conducted, and the matter is "confined to a specific group of government-linked accounts within Haryana Government operated through the said branch in Chandigarh" and stressed that it does not extend to other customers of the Chandigarh branch.

Four officials working for the IDFC First Bank have been placed under suspension pending investigation, the bank said, assuring strict disciplinary, civil and criminal action against the employees and other external individuals responsible.

As a recovery measure, IDFC First Bank has sent "recall request" to certain beneficiary banks to "lien mark balance" in suspicious accounts held in these banks, the exchange filing said.

Statutory auditors have been informed, and the bank will also be conducting an independent forensic audit by appointing an independent external agency.

Following the discovery of the issue, IDFC First Bank placed the matter before a "Special Committee of the Board for Monitoring and Follow-up of Cases of Frauds" on February 20, and apprised the audit committee and the board a day later.

In the three months ended December 31, 2025, the bank had reported a 24 per cent jump in deposits, including a 33 per cent rise in the share of the low-cost current and savings account deposits. Its net profit had zoomed 48 per cent to Rs 503 crore for the October-December period.