The Reserve Bank of India (RBI) has responded regarding the major fraud reported by IDFC First Bank, asserting that the episode does not pose a broader
threat to the banking system. Speaking at a joint press briefing with Finance Minister Nirmala Sitharaman, RBI Governor Sanjay Malhotra underscored the central bank’s stance. "We are watching the development; there is no systemic issue." The reassurance comes after the private lender disclosed irregularities amounting to nearly Rs 590 crore at one of its branches. Fraud Limited To Specific Government-Linked Accounts According to the bank, the discrepancies were identified in a cluster of Haryana government-linked accounts operated through its Chandigarh branch. The revelation triggered a sharp market reaction, with the lender’s stock plunging up to 20 per cent, its steepest intraday fall since March 2020. In a regulatory filing, IDFC First Bank detailed the scope of the issue. "Based on the preliminary internal review conducted, the matter is confined to a specific group of government-linked accounts within the Haryana Government operated through the said branch in Chandigarh and does not extend to other customers of the Chandigarh Branch. The aggregate amount under reconciliation across the identified accounts at the above-mentioned Branch is approximately 590 crore. The impact may be determined based on receipt of further information, validation of claims, recoveries of any nature, including those made through the process of marking lien on fraudulent beneficiary accounts maintained with other Banks, liabilities of other entities involved in the fraudulent transactions, and the legal recovery process," IDFC FIRST Bank said in its filing. Disciplinary And Legal Action Initiated The lender has already initiated internal checks and formal proceedings to address the matter. It confirmed suspensions and signalled strict action against those involved. "The Bank has taken the following actions: Four suspected officials have been placed under suspension pending investigation. The Bank will pursue strict disciplinary, civil and criminal action against the employees and other external individuals responsible, in accordance with applicable law," the filing added. The bank also indicated it would seek recoveries through legal channels and other mechanisms, including lien marking on beneficiary accounts where applicable. Haryana Government Cuts Ties With Two Banks In the aftermath of the disclosure, Haryana’s Finance Department (Institutional Finance & Credit Control) withdrew IDFC First Bank and AU Small Finance Bank from its empanelled list for government business, effective immediately. All state departments, boards, corporations, and public sector undertakings have been directed to shift their funds from the two lenders to other authorised banks and shut the accounts without delay, pending further instructions.
