'No systemic issue here': RBI Governor Sanjay Malhotra reacts to IDFC First Bank's Rs 590-crore fraud

• IDFC First Bank reports Rs 590-crore fraud by employees
• RBI says no systemic issue, bank capital remains adequate
• Haryana de-empanels IDFC First Bank, suspends government business

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Reserve Bank of India Governor Sanjay Malhotra on February 23 reacted to IDFC First Bank's Rs 590-crore fraud by employees and said "we are watching the development, there is no systemic issue here".

"Banks have enough capital with them. Capital adequacy is 17% while the requirement is of 11.5%," he said.

At 12:35 pm on February 23, IDFC First Bank shares were trading nearly 16% lower at Rs 70.39 apiece after falling 20% on intraday basis.

On Sunday, 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.

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.

Four employees have been suspended and a forensic audit ordered, the bank said, adding that KPMG has been appointed to conduct an independent forensic audit.

The bank said it could make recoveries, including from linked accounts at other banks.

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.

Meanwhile, Malhotra said, "Capital adequacy has improved, NPAs are lower. Confident that we will meet the needs of country towards Viksit Bharat. Will Continue to provide durable liquidity to all money, bank, govt securities markets."