AU Small Finance Bank De-Empanels Several Entities, ₹47 Crore Funds Transfer Under Scrutiny

AU Small Finance Bank Clarifies De-Empanelment by Haryana Government

Key Highlights:

• On 22 February, the Haryana government de-empaneled AU Small Finance Bank and IDFC First Bank for state government business until further orders.
• The de-empanelment was a result of a suspected ₹590 crore fraud targeting Haryana government-linked accounts at IDFC First Bank's Chandigarh branch.
• AU Small Finance Bank has initiated an internal review of the matter, which found that the government and customer accounts involved were opened after completion of all applicable KYC checks and requisite authorizations.

Internal Review Findings:

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• The bank's internal review confirmed that the government account was opened with an initial credit of ₹25 crore transferred from a large private sector bank.
• Additional credits of around ₹47 crore were received through multiple transactions from IDFC First Bank.
• Out of the total credits received, ₹47 crore was transferred to the customer account through 14 transactions, which were initiated by the concerned government department, duly authorized, and executed in accordance with the instructions provided.
• The bank maintains a complete audit trail and all details, including account opening forms, KYC documentation, cheques, and other transaction instructions, verification call details, and supporting records, which have been submitted to the concerned government department.

Bank's Response:

• The Board has been informed that the bank continues its internal review on this matter.
• To ensure a fair and transparent review, certain employees have been placed off duty.
• The bank is engaging with the Haryana government to assess the reasons for de-empanelment and will fully cooperate with the government and any other authorities, as required.

Impact on the Bank:

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• As on 17 February, AU Small Finance Bank had total deposits of ₹735 crore from the Haryana government, which has reduced to ₹538 crore as on 21 February across around 200 accounts (~0.4% of the bank's overall deposits as on 31 December), post this de-empanelment.