IDFC First Bank, in a detailed investor concall on Monday, said the recently disclosed fraud at its Chandigarh branch is confined to a single location, involves employee collusion with third parties, and has an estimated outer impact of Rs 590 crore, which the bank described as a broadly accurate and conservatively assessed figure.
“We will get to the bottom of this. We will spare no one,” Managing Director and CEO V. Vaidyanathan said at the investor call.
Management clarified that the matter is restricted to the Chandigarh branch and does not involve any other branch across its network of over 1,000 outlets. Employees from the branch have been suspended, police complaints have been filed, and a forensic audit has been initiated. The bank has appointed KPMG to conduct an independent review, with the exercise expected to take 4–5 weeks.
Total exposure
The total exposure is estimated at Rs 590 crore, comprising Rs 490 crore initially identified and an additional Rs 100 crore recognised subsequently as a prudential buffer. Management said it has clearly communicated the outer limit of the incident without delay and has taken a conservative view in quantifying the impact.
Haryana-related deposits constitute about 0.5% of the bank’s total deposits, with observed outflows of around Rs 200 crore from the concerned accounts. Overall, state and central government deposits typically account for 8–10% of the bank’s total deposit base, limiting concentration risk.
The bank said it remains well-capitalised, with capital adequacy comfortably above regulatory norms and liquidity coverage ratio at around 115%. While appropriate provisions may be taken, management stressed that profitability remains on a positive trajectory and core operations are strong. It also holds an employee dishonesty insurance cover of about Rs 35 crore.
Bank on net interest margins (NIMs)
The bank expects net interest margins (NIMs) of approximately 5.8% for the current quarter and reiterated that, prior to the incident, it was poised for a strong quarter supported by better margins and lower credit costs.
Management said the bank was first alerted by the Haryana state government, with the issue gaining momentum after February 18. One customer pointed out discrepancies in account statements, prompting reconciliation of related accounts.
The fraud was described as a branch-level group incident involving multiple accounts, where debit instructions originated from the client and funds were transferred to external parties with the connivance of certain employees. The transactions were executed through cheque-based mechanisms and not through electronic channels. The bank clarified that there was no system failure and that system-generated statements, SMS alerts and transaction notifications were duly sent.
“No communication has been received from any other state government regarding similar discrepancies,” the management said in the call.
Recovery efforts have begun, with the bank analysing the matter across Level 1, 2 and 3 scenarios to identify funds not legitimately disbursed. Funds were transferred to accounts across multiple other banks, all of which have been cooperative in the recovery process. Some recipient accounts required additional confirmations. The bank expects further recoveries from identified accounts and is pursuing all available legal and insurance avenues.
Enhanced oversight measures are being put in place to mitigate collusion risks, with specific sensitivity around government accounts. Senior management oversight has been strengthened and internal audit coverage widened.
The Board has taken cognisance of the matter and is acting in line with regulatory guidance, the management said. Calling it a “deeply disturbing” but isolated episode, management maintained that the incident does not reflect a systemic breakdown and is unlikely to derail the bank’s medium-term strategy, with tighter controls and governance recalibration forming the core of its forward response.
At 1150 IST, the shares of IDFC FIRST Bank were down over 16% at Rs 69.84 on NSE.