NEW DELHI (February 23, 2026) — Reserve Bank of India (RBI) Governor Sanjay Malhotra stated on Monday that the central bank is closely monitoring the 590 crore rupee fraud recently uncovered at IDFC First Bank, clarifying that the incident does not pose a “systemic issue” to the nation’s banking sector. Speaking at a press briefing following the customary post-budget address by Finance Minister Nirmala Sitharaman to the RBI Central Board, Governor Malhotra emphasized that the regulator is “watching the development” as the bank proceeds with recovery efforts and internal investigations.
Details of the Chandigarh Branch Irregularities
The fraud, which was publicly disclosed by IDFC First Bank on Sunday, involves unauthorized transactions at a single branch in Chandigarh. According to regulatory filings and statements from the bank, the fraudulent activity was confined to a specific set of accounts belonging to the Haryana state government.
As noted in reports by The Economic Times and The Hindu, the discrepancy was discovered after the Haryana government requested the closure of an account and a subsequent balance transfer, only to find that the reported figures did not match the bank’s records. Preliminary internal reviews suggest the fraud was committed through collusion between certain employees and external entities using forged physical cheque transactions.
Impact on Bank Operations and Governance
In response to the discovery, IDFC First Bank has taken several immediate measures:
- Personnel Suspension: Four officials suspected of involvement have been placed under suspension pending a full investigation.
- Forensic Audit: The bank has appointed the advisory firm KPMG to conduct an independent forensic review, a process expected to take four to five weeks.
- Legal Action: A formal police complaint has been filed, and the bank is pursuing civil and criminal action against the responsible parties.
- Recovery Measures: IDFC First Bank has issued recall notices to other financial institutions to lien-mark funds in suspicious beneficiary accounts, as stated by Managing Director and CEO V. Vaidyanathan.
State Government and Market Response
Following the disclosure, the Haryana Finance Department issued an immediate directive to de-empanel both IDFC First Bank and AU Small Finance Bank for state government operations. According to a circular from the department, all state boards, corporations, and universities are required to transfer their funds and close their accounts with these lenders immediately.
The news had a significant impact on the equity markets on Monday. Shares of IDFC First Bank fell by as much as 20 percent, their steepest decline since March 2020, resulting in a loss of approximately 14,438 crore rupees in market capitalization. Despite the market reaction, CEO V. Vaidyanathan maintained that the issue remains an isolated instance, noting that the affected deposits represent approximately 0.5 percent of the bank’s total deposit base.
Sources
- The Hindu: “RBI watching development around IDFC First Bank fraud, no systemic issue” (February 23, 2026)
- The Economic Times: “RBI sees no systemic risk in Rs 590-crore fraud” (February 23, 2026)
- Press Trust of India (PTI): “IDFC First Bank discloses Rs 590 crore fraud” (February 22, 2026)
- Times of India: “IDFC First Bank fraud case: RBI ‘watching development’” (February 23, 2026)
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