Kotak Mahindra Bank is facing allegations of a Rs 150-crore fixed deposit fraud linked to the Panchkula Municipal Corporation, with the modus operandi being similar to that of the IDFC First Bank scam at its Chandigarh branch.
The fraud surfaced following a maturity request for a Rs 58-crore fixed deposits, as officials discovered discrepancies in fixed deposit receipts worth nearly Rs 150–160 crore held with the Kotak Bank’s Sector 11 Panchkula branch. The case reportedly involves claims of fake records, missing deposits and an alleged cover-up.
Kotak Bank has lodged an FIR and began a reconciliation exercise, while the Haryana vigilance and anti-corruption bureau has been tasked with probing the matter.
According to the bank, its KYC (know your customer) and internal processes remain intact, and a large portion of deposits have already been reconciled. It is fully cooperating with the corporation, government authorities, and law enforcement agencies.
Just weeks earlier, a similar scam had been unearthed at IDFC First Bank’s Chandigarh branch, where a fraud of nearly Rs 590 crore was detected. Both the frauds are similar in nature, involving forged records and fraudulent account openings to divert funds.
‘Smurfing’ Strategy
This is a long-running, branch-enabled fraud built on the systematic creation of multiple bank accounts supported by fake documentation, said a source. He added that perpetrators (bank and government officials) have gone ahead and created accounts and simultaneously gave a bank statement and a fake FD to the government, indicating that forged bank statements and fabricated FD receipts were routinely used to demonstrate financial strength or meet compliance requirements.
Once these accounts were opened, they executed a series of short-denomination, small-value transactions, deliberately keeping them below monitoring thresholds. The money was then withdrawn in cash in similarly small denominations, enabling a quiet siphoning of funds. This is not an isolated or recent phenomenon, but has been happening for quite some time, sources said.
This incident is unlikely to have occurred without lapses or possible collusion at the branch level, particularly involving individuals responsible for key control functions. The breakdown in internal oversight is evident, especially given that fraudulent activities appear to be concentrated in a specific locality. The presence of multiple accounts originating from the same area suggests an organised network.
Systemic Contagion
The modus operandi closely resembles the one seen in the IDFC First Bank case, particularly in the use of structured small-value transactions to evade detection, creation of multiple pass-through accounts, and the reliance on branch-level collusion. Both involve fake or misleading documentation, geographic clustering of fraudulent accounts, and the participation of individuals from the bank and the government.
Earlier, AU Small Finance Bank also came under scrutiny in the same wave of irregularities. The Haryana government responded by de-empanelling the SFB along with IDFC First from handling government business, citing serious lapses in compliance and oversight.
According to experts, these cases reveal a disturbing pattern of financial irregularities in government deposits across banks, highlighting weak internal controls within civic bodies and lapses in banking oversight.