Shares of India’s IDFC First Bank fell sharply on Monday, dropping as much as 20% after the private lender revealed a suspected fraud of 5.9 billion rupees (around US$65 million or RM252.6 million). The disclosure raised concerns about potential impacts on the bank’s earnings and investor confidence.
As of 11:46 a.m. IST, the stock was down 15.8% at 70.29 rupees, marking its lowest level since October 2025, and was on track for its worst trading session in six years. The bank led losses among Indian financial stocks, while the broader benchmark index rose 0.35%.
The Mumbai-based lender, which has a loan book of 2.79 trillion rupees (US$30.8 billion) and deposits totaling 2.82 trillion rupees, had previously attracted investments from Warburg Pincus and the Abu Dhabi Investment Authority.
IDFC First Bank reported that the suspected fraudulent transactions occurred at a Chandigarh branch, primarily involving government-linked accounts. The irregularities were discovered when entities from the northern state of Haryana attempted to close accounts, and the balances did not match the bank’s records. The issue surfaced about a month ago, and the Reserve Bank of India (RBI) is aware of the matter. RBI governor Sanjay Malhotra confirmed there is no systemic risk to the banking system.
In response, the bank has suspended four employees and engaged KPMG to carry out an independent forensic audit. Analysts estimate the potential financial impact to be significant but manageable. UBS estimated the fraud at roughly 22% of the bank’s fiscal 2026 net profit after tax, while Morgan Stanley pegged the potential hit to profit before tax at about 20%. The bank also has employee dishonesty insurance, with potential recoveries of 350 million rupees.
The suspected fraud could affect the bank’s handling of government cash balances, which are considered lucrative due to their volume. Following the disclosure, the Haryana state government removed IDFC First and AU Small Finance Bank from its approved list of banks for holding government accounts. AU Small Finance clarified that preliminary reviews show no financial impact or evidence of fraud on its side, though its shares still dropped 7.74%, their steepest decline in over a year.
Macquarie analysts noted that government deposits in private banks are likely to face heightened scrutiny. IDFC First’s management indicated that deposits from Haryana account for just 0.5% of total deposits, suggesting the overall impact is manageable.
