MUMBAI: IDFC First Bank Ltd shares tumbled the most in nearly six years after the mid-sized Indian lender disclosed suspected fraud in accounts linked to a state government and says the Haryana state asked to pull funds from the bank.
Discrepancies of about 5.9 billion rupees (US$65mil) surfaced after the state department sought to close and transfer its account from a branch in Haryana, the bank said in a filing over the weekend.
Four officials have been suspended, a police complaint filed and an independent forensic audit is being initiated, the bank said, adding an initial review found the issue contained to a specific group of government-linked accounts at that branch.
The bank’s shares slumped as much as 15%, the biggest intraday decline since March 2020.
Separately, shares of AU Small Finance Bank fell about 7% after the lender separately said it is seeking details on a government account and suspected unauthorised transactions in the same northern Indian state of Haryana.
It said it has been informed of its de-empanelment for government business in the state.
For IDFC First Bank, the fraud amounts to 3% of deposits in Haryana, IIFL Capital’s equity research analyst Rikin Shah said in a note.
There could be a potential outflow of 20 billion rupees, or 0.7% of total deposits, assuming 10% of deposits in Haryana are from the government accounts, Shah said.
Chief executive officer V Vaidyanathan said the case involved collusion between some employees and counterparties.
There was no impact on its balance sheet, and the bank would maintain high liquidity buffers, he said on an analyst call yesterday.
IDFC First Bank has appointed audit firm KPMG for a forensic audit of its Haryana branch, which is expected to be completed in four to five weeks, chief financial officer Sudhanshu Jain said on the same call.
IDFC First Bank was formed in December 2018 through the merger of IDFC Bank and Capital First, creating a lender positioned to blend infrastructure‑focused banking with a fast‑growing retail franchise.
Since the merger, the bank has pushed aggressively into consumer and small and medium enterprise lending while working to rebalance its legacy book and improve liability quality. — Bloomberg
