What happened
On 22 February 2026, IDFC First Bank disclosed that it had detected a suspected fraud of about ₹590 crore at its Chandigarh branch, involving government-linked accounts of the Haryana state. The irregularities came to light when a Haryana government department asked to close an account and move funds, and a large mismatch was discovered between the bank’s books and the department’s figures.
The bank said the fraud appears to have been carried out by some branch employees in collusion with external parties, using forged instruments and payment instructions to siphon off funds from government accounts.
Action taken so far
-
Four people have been arrested in connection with the fraud, including two former bank employees and two private individuals linked to a partnership firm.
-
The Haryana State Vigilance and Anti-Corruption Bureau filed an FIR in the case and is continuing the probe.
-
Bank officials involved have been suspended and a forensic audit by an independent agency (such as KPMG) has been commissioned to dig into the controls and how the fraud occurred.
Government and regulatory response
-
The Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank from doing gov-related business for now, and ordered all departments to move their funds to other banks.
-
A high-level panel has been set up by the Haryana government to investigate unauthorised fund transfers and review banking oversight.
-
The Reserve Bank of India (RBI) said it does not see any systemic risk to the wider banking industry from the incident.
Money recovery and bank’s stance
IDFC First Bank has already refunded ₹583–₹556 crore (including interest) to the Haryana government departments affected, underlining a commitment to full restitution even as the investigation proceeds.
The bank has stressed that the suspected fraud is limited to a specific cluster of government accounts at one branch and does not affect other customers.
Market reaction and impact
The revelation of the fraud sent IDFC First Bank’s share price down sharply, erasing substantial market value due to investor concerns over governance lapses and control failures.
Some local bodies, including the Municipal Corporation of Gurugram, responded by shifting significant funds out of the bank and into public sector banks for greater security.
What it means
While the bank continues to work with authorities on recovery and legal action, the episode has raised questions about internal controls, oversight mechanisms and investor confidence in mid-tier private banks. Government assurance and RBI’s calm stance aim to reassure depositors and markets, but the full fallout will depend on the forensic audit findings and ongoing legal proceedings.
