IDFC First Bank is investigating if the documents at the centre of an alleged ₹590 crore fraud at its Chandigarh branch were genuine or forged, two people familiar with the matter said, even as it has suspended four officials and prepares a forensic audit.
The Warburg Pincus-backed lender on Sunday said the discrepancy was discovered when a Haryana government department requested that its account be closed and the funds transferred to another bank—the account balance was found to differ from what the account owner believed it should be. Similar discrepancies were noted when other Haryana government entities engaged with the bank on their accounts.
IDFC First told the stock exchanges that it has informed the RBI, filed a complaint with the police and is also in the process of filing further complaints with appropriate law enforcement agencies and reporting to relevant authorities. It is also in the process of appointing an independent external agency for an independent forensic audit.
Out of the ₹590 crore, some amounts were transferred to accounts of other government departments, the people said on the condition of anonymity. The money transfers were made after cheques and authorization letters, purportedly from the government departments, were submitted. However, the genuineness of these documents is yet to be ascertained.
Authorized transfers?
“The bank cannot initiate transactions unilaterally; these are based on authorizations from the account holders, but now, the bank will check whether these are fake,” one of the two people cited above said.
While IDFC First has suspended four officials, it is not clear if any external person was involved. “Investigations will find out whether there was collusion between bank officials and other individuals,” the person said. According to this person, this was not a case of digital fraud, but the age-old swindle of using forged documents to siphon off money.
A bank spokesperson said IDFC First has a proper standard operating protocol (SOP), in line with industry standards of maker-checker to authorize branch-level transactions. Maker-checker is a process to curb errors, where one individual initiates a transaction and another reviews it. The bank also sends periodic statements and transaction alerts to customers, it said.
“The bank will pursue strict disciplinary, civil and criminal action against the employees and other external individuals responsible, in accordance with applicable law,” the spokesperson said.
A query emailed to the Haryana government on Sunday remained unanswered.
De-empanelled
Just last week, the Haryana government directed all its departments to obtain prior approval from the finance department before opening bank accounts with private banks. A government order dated 18 February also de-empanelled and AU Small Finance Bank for government business in Haryana with immediate effect. This means that no government funds will be parked or transacted through these banks.
It is not clear if the de-empanelment is related to the alleged fraud.
“All concerned departments/organizations shall take immediate action for transfer of balances and closure of accounts maintained with the above banks,” it said. The order also said that despite clear instructions to place funds in flexible deposits or other fixed deposit instruments offering higher rates of interest, some banks were retaining the funds in savings accounts, resulting in lower returns and consequent financial losses to the government.
AU Small Finance Bank did not respond to an emailed query.
The latest incident adds to the growing list of frauds in India’s banking sector. These range from ones involving lending, deposits and forex transactions. Lenders reported 5,092 frauds involving ₹21,515 crore in the first six months of FY26, as against 18,386 frauds worth ₹16,569 crore in the same period last financial year, per data from the Reserve Bank of India ().
Regulatory concerns
There is regulatory concern as well. “Frauds present multiple challenges by exposing financial institutions to reputational, operational and business risks, while also weakening customer trust,” according to the latest RBI Report On Trend And Progress Of Banking In India.
According to the second person cited above, government departments usually step up spending in the last three months of the financial year, and that is when a majority of fund transfers happens. The person said the transactions are unlikely to have happened more than two months ago, since every quarter, the bank audits large-value accounts and these discrepancies would have surfaced in those assessments.
“The bank has already suspended some employees, but it is hard to say who all are involved before the investigation is complete,” said the second person.
“The RBI could now check if there are similar patterns in other lenders as well. This is important to see whether this is limited to IDFC First Bank or whether others could be at risk as well,” the second person said.
IDFC First Bank reported a net profit of ₹503 crore in the three months through December. It held deposits of ₹2.82 trillion, while its loan book stood at ₹2.8 trillion as on 31 December.