New Delhi: Reserve Bank Governor Sanjay Malhotra on Monday said the central bank is keeping a watch on the development around Rs 590-crore alleged fraud at IDFC First Bank, and assured it was not a “systemic issue”.
Private sector IDFC First Bank had on Sunday disclosed a Rs 590-crore fraud committed by certain employees and others at a particular branch in Chandigarh in a specific set of Haryana state government accounts.
“We are watching the development…there is no systemic issue over here,” Malhotra said in a press briefing on Monday, following the post-Budget meeting of the RBI Board of Directors with Finance Minister Nirmala Sitharaman here.
IDFC First Bank had said that the fraud is “confined to a specific group of government-linked accounts within the Haryana government” operated through the said branch in Chandigarh”, and stressed that it does not extend to other customers of the Chandigarh branch.
On Saturday, IDFC FIRST Bank informed exchanges that it had received a request from a Haryana government department for the closure of its account at a Chandigarh branch and transfer of funds to another bank.
In the process, the bank observed differences in the balances in the account and the balances mentioned by the Haryana government department. The discrepancy observed was of Rs 490 crore, and an additional Rs 100 crore was identified by the bank, taking the total discrepancy amount to Rs 590 crore.
Shares of IDFC First Bank tumbled 20 per cent on Monday after the private sector lender disclosed a Rs 590-crore fraud committed by its employees and others in accounts held by the Haryana government.
The stock nosedived 19.99 per cent to Rs 66.85 — also its lower circuit limit — on the BSE on Monday.
The move came after the Haryana government de-empanelled AU Small Finance Bank, along with IDFC First Bank, from undertaking any government business over alleged fraudulent opening of accounts.
Shares of AU Small Finance Bank plunged 7.62 per cent to hit an intra-day low of Rs 950.50 apiece on the exchange.
Earlier in the day, the bank’s management said it has suspended the employees suspected of fraudulent activities, and so far, it has not come across the involvement of senior management.
“This is basically a case where debit instructions have come supposedly from the client, which our people — which clearly, to us, indicate the fraudulent activity — have passed the entries and have transferred the money to certain parties outside the bank from the client’s account,” IDFC First Bank MD and CEO V Vaidyanathan said at a conference call with investors.
“So, this looks to us, on the basis of the work we’ve done, clearly, a case of employee fraud. And also our internal fingerprints and our details are quite clear that external parties are also involved here,” he said.
The fraud was committed through physical transactions involving cheques, he said, adding that this “obviously happened” because of the connivance of employees.
