India’s IDFC First Bank shares on Monday, declining up to 20 percent after the private lender announced a purported 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.
The stock dropped 15.8 percent to 70.29 rupees at 11:46 a.m. IST, its lowest level since October 2025, and was trading in its worst session in six years.
The bank was among the biggest losers in the list of Indian financial shares, as the wider benchmark index increased by 0.35 percent.
Mumbai-based lender, with a loan book of 2.79 trillion rupees (US$30.8 billion) and deposits amounting to 2.82 trillion rupees, had already been the target of investments by Warburg Pincus and the Abu Dhabi Investment Authority.
The IDFC First Bank has reported that the alleged fraudulent transactions were done at one of the Chandigarh branches, where most of the transactions were aimed at government-related accounts.
The discrepancies were uncovered when accounts belonging to bodies of the northern state of Haryana were closed, and the balances did not agree with the bank records.
However, the issue surfaced about a month ago, and the Reserve Bank of India (RBI) is aware of the matter. RBI Governor Sanjay Malhotra affirmed that the banking system is not under systemic risk.
In response, the bank has suspended four employees and has hired KPMG to carry out an independent forensic audit. Analysts estimate that the financial impact that it may create is huge but can be handled.
UBS estimated the fraud to be about 22 percent of the 2026 net profit after tax of the bank, and Morgan Stanley approximated the possible damage to the profit before tax at approximately 20 percent. There is also employee dishonesty insurance for the bank, which can recover up to 350 million rupees.
The alleged fraud might have implications for the way the bank handles the cash balances of the governments, which are reckoned to be profitable since they are in great numbers.
After the revelation, the Haryana government state took the IDFC First and the AU Small Finance Bank off their list of approved banks to hold government accounts.
AU Small Finance explained that even its initial checks revealed that no financial effect or signs of fraud were taken on its part, yet its stock plunged 7.74 percent, its worst drop in more than one year.
Macquarie analysts observed that government deposits in the private banks are expected to be under increased scrutiny. According to the management at IDFC First, Haryana deposits represent only 0.5 of the total deposits, meaning that the overall impact of the Haryana deposits is manageable.
