IDFC First Bank has disclosed a suspected fraud of about Rs 590 crore at its Chandigarh branch involving accounts linked to departments of the Haryana government, prompting the bank to suspend four officials and initiate a forensic audit. The private sector lender said, in a stock exchange notification, it detected discrepancies after receiving a request from a department of the Haryana government to close its account and transfer funds to another bank.
During the process, differences were observed between the amount mentioned in the request and the balance reflected in the account. Subsequently, from February 18 onwards, other Haryana government entities approached the bank regarding their accounts, where further mismatches were identified between the balances held with the bank and those stated by the entities.
“Based on the preliminary internal review conducted, the matter is confined to a specific group of government-linked accounts within Haryana Government operated through the said branch in Chandigarh and does not extend to other customers of the Chandigarh Branch,” the bank said.
The final impact would depend on validation of claims, recoveries — including through lien marking of balances in suspected beneficiary accounts held with other banks — liabilities of entities involved in the transactions, and the outcome of legal recovery proceedings.
Additional meeting
A meeting of the special committee of the Board for Monitoring and Follow-up of Cases of Frauds was convened on February 20, followed by meetings of the Audit Committee and the Board of Directors on February 21 to review the matter. The statutory auditors have been informed.
The lender has filed a complaint with the police and is in the process of appointing an independent external agency to conduct a forensic audit. It has also sent recall requests to certain beneficiary banks to lien-mark balances in suspicious accounts.
The bank has informed the regulator and is also in the process of filing further complaints with appropriate law enforcement agencies and reporting to relevant authorities. On Friday, the shares of IDFC FIRST Bank closed 0.3% higher at Rs 83.25 on NSE.
Haryana govt de-empanels IDFC FIRST, AU small bank
The Haryana government has de-empanelled IDFC FIRST Bank and AU Small Finance Bank for government business in the state with immediate effect, until further orders. The Finance Department has directed that no government funds be parked, deposited, invested, or transacted through the two lenders.
All departments and organisations have been asked to transfer balances and close accounts maintained with these banks without delay. The order also flags irregularities in the handling of fixed deposits by certain banks. Despite clear instructions to place funds in flexible or higher-yielding fixed deposit instruments, some funds were allegedly retained in savings accounts, leading to lower returns and “financial loss to the government”.
Departments, corporations, boards and PSUs have been directed to strictly adhere to deposit terms, verify compliance, reconcile accounts monthly, and report serious discrepancies. All reconciliations must be completed by March 31, with compliance reports to the finance department by April 4.