RBI Governor Sanjay Malhotra Dismisses Systemic Risk Following IDFC First Bank's Rs 590-Crore Fraud

IDFC First Bank Embroiled in Rs 590-Crore Fraud Scandal

On February 23, IDFC First Bank revealed a Rs 590-crore fraud perpetrated by its employees and others in accounts held by the Haryana government. The lender disclosed the matter to the Reserve Bank of India and filed a police complaint.

IDFC First Bank shares plummeted 20% intra-day, trading at Rs 70.39 apiece at 12:35 pm on February 23, a decline of nearly 16% from the previous day's close. The suspected fraud represents approximately 0.9% of the bank's net worth and 20% of its fiscal 2026 pre-tax profit, according to brokerage estimates.

UBS estimated the suspected amount at about 22% of IDFC First's fiscal 2026 profit after tax, with limited capital impact at around 1% of the bank's net worth. Morgan Stanley echoed a similar view, pegging the potential hit to fiscal 2026 profit before tax at roughly 20%. Jefferies noted that the lender will need to reassure investors that the issue has not spread to other clients and that the matter does not appear to be systemic.

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IDFC First Bank has suspended four employees and ordered a forensic audit, with KPMG appointed to conduct an independent investigation. The bank may recover funds from linked accounts at other banks. Meanwhile, the Haryana government has de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect.

Reserve Bank of India Governor Sanjay Malhotra stated that banks have sufficient capital, with a capital adequacy ratio of 17% exceeding the required 11.5%. He noted that capital adequacy has improved, non-performing assets (NPAs) are lower, and the bank is confident in meeting the country's needs towards Viksit Bharat.