Employee collusion led to account fraud and profits remained solid despite provisions: IDFC Bank

V. Vaidyanathan, Chief Executive Officer (CEO), IDFC First Bank (file photo) | Photo credit: FRANCIS MASCARENHAS

In a specially convened call to investors and analysts ahead of the opening of equity markets, Vaidyanathan said the bank will make a number of provisions in view of the fraud and in line with its policy of recognizing any stress in advance.

However, the same is unlikely to have a major impact on earnings, he said, noting that wider net interest margins and credit costs will help.

“So on a standalone basis we expected a very solid fourth quarter in terms of profitability,” Vaidyanathan said.

The Haryana government has dissolved IDFC First Bank and AU Small Finance Bank for government affairs after IDFC Bank exposed fraud worth ₹590 cr in Haryana government accounts. AU Small Finance Bank has denied any wrongdoing.

Vaidyanathan said the independent forensic audit by consultancy firm KPMG is expected to be completed within four to five weeks.

“We only appointed KPMG yesterday (Sunday)… Normally these processes, as far as I know, can take about four to five weeks,” he said.

The bank has identified the difference at around Rs 590 crore, comprising Rs 490 crore identified after reconciliation and an additional Rs 100 crore that was “self-identified” through internal controls, the MD said, noting that the amount of Rs 590 crore is unlikely to increase.

“We have disclosed this number as we could have assessed at this time – we do not expect this to change broadly from now on,” Vaidyanathan said.

Chargebacks and an employee dishonesty cover of Rs 35 crore could reduce the impact on the bank, he said.

Describing the episode as a case of “collusion” involving employees and third parties through forged physical check transactions, Vaidyanathan said the problem was limited to one branch, one customer group, and claimed there was no system reporting error.

The lender has filed complaints with police, notified regulators and auditors, and initiated remediation and retention measures across the banking system, he said.

Vaidyanathan said Haryana government account deposits constitute about 0.5 percent of the bank’s total deposits, while total government deposits, including central and state entities, constitute 8 to 10 percent of the deposit base.

In the three months ended December 31, 2025, the bank reported a 24 percent increase in deposits, including a 33 percent increase in the share of low-cost checking and savings account deposits. Net profit was up 48 per cent to Rs 503 crore in the October-December period.

Shares of IDFC First Bank were trading 15.58 per cent lower at Rs 7,054 apiece on the BSE at 11.15 am.

Published on February 23, 2026