Major Selloff Following Fraud Disclosures
IDFC First Bank witnessed a dramatic crash in its share price, plunging by as much as 20% and wiping out over ₹14,000 crore in investor wealth. The massive selloff was triggered by the revelation of a suspected ₹590 crore fraud at its Chandigarh branch, which involved government accounts belonging to the State of Haryana.
Details of the Chandigarh Branch Fraud
The alleged fraud surfaced when a Haryana government department requested to close its account and transfer funds, highlighting severe discrepancies between the bank’s reported balances and the actual amounts. Preliminary investigations suggest unauthorized and fraudulent transactions carried out by certain bank employees, likely in collusion with external individuals through forged physical cheques.
Immediate Actions and Recoveries
In response to the crisis, IDFC First Bank suspended four branch officials suspected of involvement and lodged a formal police complaint. The bank engaged KPMG to conduct an independent forensic investigation to ascertain the full scope of the fraud. Notably, Haryana Chief Minister Nayab Singh Saini confirmed that approximately ₹556 crore of the misappropriated funds had already been recovered within 24 hours. Despite the swift recovery, the Haryana government has removed IDFC First Bank from its empanelled list for handling government accounts.
Bank CEO V. Vaidyanathan categorized the event as an isolated incident of internal collusion rather than a structural weakness, a sentiment echoed by RBI Governor Sanjay Malhotra, who confirmed that the bank faces no systemic risk over the incident.
