IDFC First Bank fraud: After an over 16% crash in the previous session, IDFC First bank share price steadied on Tuesday, February 24. The crash yesterday came after the lender disclosed that a ₹590 crore fraud had been detected at its Chandigarh branch, involving accounts linked to the Haryana government. The revelation, made over the weekend, rattled investor confidence and triggered sharp selling in the stock.
In intra-day deals today, the scrip fell 2.1% to its day’s low of ₹68.56 on BSE.
The bank said the total discrepancy stood at ₹590 crore, of which ₹490 crore had already been identified through reconciliation, while an additional ₹100 crore was estimated based on preliminary findings. The disclosure prompted swift action from the Haryana government, which de-empanelled IDFC First Bank and AU Small Finance Bank from accepting fresh government deposits.
Brokerages cut targets but stay constructive
Despite the sharp reaction in the previous session, brokerages said the incident appeared to be operational rather than structural, though near-term earnings and sentiment were likely to take a hit.
Axis Direct said, “While the fraud appears limited to a single branch and management does not expect any material escalation, near-term profitability will be impacted. We have cut FY26 earnings sharply, though we broadly maintain FY27–28 estimates, assuming no cascading impact from government-related business.”
Axis Direct reiterated its BUY recommendation on the stock, but revised its target price to ₹87 per share, implying an upside of 24% from the current market price. The brokerage now values the at 1.4x Sep-28E adjusted book value, compared with 1.6x earlier, factoring in a 23% cut to FY26 earnings. It believes valuations of 1.2x–1.1x FY27–28E adjusted book value are reasonable, though a meaningful re-rating would depend on flawless execution and stronger internal controls.
It added, “The outcome of the forensic audit will be closely watched, particularly for any spillover into other government accounts. While deposit growth remains largely granular and retail-driven, sustained confidence will hinge on strengthening internal processes alongside maintaining growth ahead of the system.”
Emkay, meanwhile, retained an ADD rating on but cut its target price by around 16% to ₹80, valuing the stock at 1.2x FY28E adjusted book value.
Emkay said, “The ₹5.9 billion mismatch represents about 1.25% of net worth and 0.2% of deposits. While this appears to be an isolated operational lapse, it could temporarily disrupt CASA momentum and delay near-term re-rating, though it does not derail the long-term RoA recovery story.”
Emkay noted that the fraud could lead to incremental outflows from Haryana government accounts, which account for around 0.5% of overall deposits, or roughly ₹14.5 billion. It also flagged potential second-order impacts on margins and business momentum, leading it to cut FY26, FY27, and FY28 earnings estimates by 30%, 13%, and 9%, respectively.
While brokerages broadly agreed that the incident was not comparable to a structural governance failure, they cautioned that investor confidence and valuation recovery would now hinge on the findings of the forensic audit, recovery progress, and the bank’s ability to reinforce internal controls without losing growth momentum.
IDFC First Bank fraud: What we know so far
IDFC First Bank stated that, on a preliminary basis, unauthorised and fraudulent transactions appeared to have been carried out by certain employees at its Chandigarh branch, possibly in connivance with external parties. The irregularities were confined to a specific set of Haryana government-linked accounts maintained at that branch.
The issue surfaced after the bank received a request from a Haryana government department seeking closure of its account and transfer of funds to another bank. This prompted internal scrutiny, which revealed discrepancies across the identified accounts.
In a regulatory filing, the lender said the eventual financial impact would depend on several factors, including validation of claims, recoveries through lien marking on beneficiary accounts held with other banks, liabilities of other entities involved in the transactions, and outcomes of legal recovery proceedings.
Managing Director and Chief Executive Officer V. Vaidyanathan described the episode as a clear case of employee fraud during a conference call, stating that internal evidence also pointed to the involvement of external parties. Four bank officials have been suspended pending investigation, and the matter was placed before the Special Committee of the Board for Monitoring and Follow-up of Cases of Fraud on February 20, 2026.
The bank has appointed KPMG to conduct a forensic audit, which is expected to take four to five weeks. Police complaints have been filed, law enforcement agencies have been engaged, and recovery and lien-marking actions have been initiated across the banking system.
Following the disclosure, the Haryana government issued a circular stating that no government funds would be parked, deposited, invested, or transacted through IDFC First Bank or until further orders.
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