Shares of IDFC First Bank edged higher in early trade on Tuesday after steep losses in the previous session. The stock was trading around ₹70.83 in early deals, up about 1%.

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On Monday, the shares closed nearly 16% lower after hitting a 20% lower circuit intraday. The decline marked the bank’s sharpest single-day fall since the Covid period. More than ₹11,000 crore in market capitalisation was wiped out during Monday’s session. At current levels, the bank’s market capitalisation stands at over ₹60,000 crore.

Fraud Disclosure And Initial Impact

The selloff followed the bank’s disclosure of a ₹590 crore fraud involving certain employees and Haryana government-linked accounts. The incident occurred at a single branch in Chandigarh.

The issue came to light after a Haryana government department sought to close its account and transfer funds to another lender. A reconciliation exercise subsequently revealed the discrepancy.

The bank said the fraud involved alleged collusion between certain employees and external parties. Funds were transferred to beneficiary accounts outside the bank.

Payment To Haryana Government

IDFC First Bank has informed the Haryana government that it will pay the unreconciled amount of around ₹590 crore. Sources told Business Standard that the assurance was given following a meeting between the bank’s senior management and state officials.

The bank said it would own the incident and make the payment at the earliest. The amount is expected to be paid shortly.

The lender stated that Haryana government deposits account for around 0.5% of its total deposits. Since the incident, around ₹200 crore has flowed out from these deposits. The bank’s total deposit base stands at about ₹2.82 trillion.

Actions Taken By The Bank

IDFC First Bank has suspended four employees in connection with the incident. Regulators and statutory auditors have been informed. A police complaint has been filed.

The bank has appointed KPMG to conduct an independent forensic audit. The audit report is expected within four to five weeks.

The lender has also initiated recovery measures. These include recall requests and lien marking of balances in suspicious beneficiary accounts held at other banks.

Regulatory And Operational Updates

The Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect.

The bank said it will strengthen controls for high-value branch transactions. Explicit customer confirmation will be made mandatory above a predefined threshold. Verification will be carried out through a digital channel in addition to existing checks.

The bank also plans to deploy artificial intelligence for initial cheque signature verification. This will be followed by human verification as an additional layer of control.

Systemic Position

Reserve Bank of India Governor Sanjay Malhotra said on Monday that the central bank is monitoring developments closely. He said there is no systemic issue and that banks remain well capitalised.

IDFC First Bank shares remain up about 18% over the past year, despite the recent decline.