A routine account-closure request from a Haryana government department has triggered one of the most serious fraud investigations in the history of IDFC First Bank fraud. What started as a simple balance check has now expanded into a massive Rs 590-crore reconciliation exercise. The revelation led to a regulatory disclosure, multiple high-level internal meetings, and a sharp selloff in the lender’s stock.
The Red Flag That Exposed the Breach
The crisis began when a Haryana government entity requested to shut its account and transfer the funds. While processing this request, bank officials realized the department’s records did not match the balance in the bank’s own books. This single discrepancy immediately prompted a deeper internal check.
Over the following days, starting February 18, 2026, several more Haryana government-linked entities approached the bank with similar concerns. Each one claimed balances that differed significantly from what the bank’s system showed. Preliminary assessments revealed that these irregularities were concentrated within a specific cluster of accounts at the bank’s Chandigarh branch.
According to a formal disclosure filed with stock exchanges, the bank believes the issue is isolated to this group. The suspected amount under reconciliation is approximately Rs 590 crore. However, the final financial impact depends on recoveries, insurance, and the validation of various claims.
Market Reaction and Institutional Fallout
Despite the bank’s immediate attempt to contain the news, investors reacted with alarm. Shares of IDFC First Bank plunged nearly 20% on the Bombay Stock Exchange (BSE) on February 23, 2026. This sudden slide reflects intense concern over governance lapses and the scale of the suspected fraud.
For a lender that positions itself as a disciplined institution, this breach carries heavy reputational weight. The Haryana government has responded by temporarily suspending all dealings with the bank. A state circular now prohibits government funds from being deposited or transacted through IDFC First Bank and AU Small Finance Bank until further notice.
Swift Remedial Measures and Forensic Audit
In response to the crisis, IDFC First Bank suspended four employees linked to the Chandigarh branch irregularities. The lender also reported the matter to the Reserve Bank of India (RBI), law enforcement agencies, and statutory authorities.
The bank’s Special Committee for Monitoring and Follow-up of Frauds met on February 20. This was followed by the Audit Committee and the full Board on February 21. To ensure a thorough investigation, the lender appointed KPMG to conduct an independent forensic audit.
The bank has also sent recall and lien-mark requests to other banks where suspicious beneficiary accounts have been identified. Senior management described the incident as unauthorized activity carried out by certain employees, potentially in collusion with external parties.
While the bank remains well-capitalized, the optics of manual overrides and tampered public-sector accounts have kept scrutiny high. As the investigation progresses, the central questions revolve around accountability and operational weaknesses. For now, the bank maintains the breach is contained, but this governance test is far from over.
Also Read : RBI Introduces Risk-Based Premium Framework to Boost Bank Profitability and Risk Management