2 bank sector stocks are in focus today- The Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect until further orders. The state government also said that no government funds will henceforth be parked, deposited, invested, or transacted through these banks. However, the triggers and impact are significantly different.
IDFC First Bank informed exchanges of a suspected Rs 590 crore fraud involving employee-linked irregularities in Haryana government accounts. Addressing analysts at a conference call, the IDFC First Bank reassured investors that its capitalization is adequate. Meanwhile, AU Small Finance Bank, has been de-empanelled due to suspected unauthorised transactions. However, the bank has closed the government account on January 15, based on instructions from the Haryana Government.
Here is a detailed look at what triggered the de-empanelment for both banks and future implications on the earnings.
Suspected Rs 590 crore fraud equals 0.9% of IDFC First Bank’s net worth: Jefferies
IDFC First Bank has detected a suspected fraud of around Rs 590 crore at its Chandigarh branch, linked to certain Haryana state government accounts. The amount, however, is subject to further validation, recoveries, lien-marking of beneficiary accounts with other banks, and legal proceedings.
According to Jefferies, the suspected fraud amounts to about 0.9% of the bank’s net worth on a post-tax basis. Nomura however, flagged concerns about governance but maintained Buy rating on the stock.
IDFC First Bank said the suspected fraud does not extend to other customers of the branch and does not appear to be a widespread issue. During its conference call, CEO V Vaidyanathan said that Haryana government accounts account for about 0.5% of its total deposits. He added that overall state-related deposits account for around 8–10%, including deposits from the Central government and various state governments.
The bank said it has launched a detailed investigation and initiated steps to recover the funds.
AU Small Finance Bank says Haryana de-empanelment to have limited impact
The AU Small Finance Bank received a communication on February 16 from the Haryana government department seeking details related to one specific government account. The bank in its BSE release said that it had submitted all the required account-opening and transaction information. The Government Account was closed on January 15, 2026, as per instructions from the Department and the outstanding balance of Rs 25 crore along with accrued interest was transferred back to the original large private sector bank.
On February 18, the bank received another request from the department seeking information on suspected unauthorised transactions between the government account and another customer account maintained with the bank.
On the same day, the Haryana Finance Department informed AU Small Finance Bank about its de-empanelment for government business with immediate effect.
AU Small Finance Bank said both the government account and the customer account were opened after completing all applicable KYC checks, authorisations and internal procedures, in line with the bank’s policies.
Jefferies on AU Small Finance Bank: Impact of de-empanelmet manageable
Jefferies believes that the impact of the de-empanelment appears manageable for the AU Small Finance Bank, as the bank highlighted that deposits from the Haryana government account for only a small share of its overall deposit base and there is no indication of any financial loss so far.
As per the bank, deposits linked to the Haryana government currently stand at Rs 50 crore, which is around 0.4% of its total deposits. Earlier, these deposits were at Rs 70 crore, indicating a reduction even before the de-empanelment order.
The bank said that it had total deposits of approximately Rs 735 crores as on February 17 from the Government of Haryana. However, it dropped to Rs 538 crores as on February 21.
AU Small Finance in its press release said that it is engaging with the Government of Haryana for assessing the reasons for deempanelment.
AU Small Finance and IDFC First Bank share price
The share price of AU Small Finance and IDFC First Bank plunged in the intraday on Monday following the development and scrutiny. AU Small Finance plunged nearly 6% and IDFC First Bank nosedived 20% in early trade, and it is still trading down nearly 16% in the intraday trade.