Sidique, 22 February 2026, New Delhi- IDFC First Bank has reported a huge fraud of 590 crore, at the Chandigarh branch of the bank, which included unauthorized transactions at the Haryana government accounts. The announcement, which was made in a regulatory filing to the stock exchanges on Friday, has caused shock waves in the banking sector of India, casting serious doubts on the internal control and supervision with regard to managing the public funds.
The bank disclosed the fraud after a regular internal audit revealed the fraud in late January 2026 as per the Prevention of money laundering Act (PMLA) and SEBI regulations. The seniors at the bank reported the event to the Reserve Bank of India (RBI), the Enforcement Directorate (ED) and Chandigarh Police. Initial inquiries suggest colluding rogue bank employees along with third parties who are reported to have embezzled loan records and stole money in the space of 24 months between mid 2024 and early 2026.
The center of the scam is a number of dormant and active accounts belonging to the departments of the Haryana state government such as rural development schemes and irrigation projects. Individuals privy to the investigation disclosed that defrauders used these accounts to establish false loans, exaggerated payments, and laundered funds using shell companies. The bank core banking system was used by the perpetrators to create false sanction of government-approved projects, which were directed to beneficiary accounts under the care of accomplices, a banking executive told the reporters on a condition of anonymity.
The Chandigarh branch is a mid size outlet with large government business in tricity city (Chandigarh, Mohali, Panchkula) that had more than Rs 5,000 crore annual transaction with the clients of the government. Naturally volatile as well were Haryana government accounts which constitute a significant portion of this volume because they are high-value, low-frequency transfers characteristic of state-level initiatives such as Pradhan Mantri Awas Yojana and MGNREGA payments.
The statement of IDFC First Bank confirmed the amount of fraud to be 590.14 crore and 450 crore of the amount already billed as unrecovered losses. The bank has already prepared the reserves of 300 crore of bank money to meet the short term effects, but the shares fell 4.2 percent in initial trade on Monday and swept away market value of 1200 crore. The bank said in its filing that it was fully cooperating with authorities and suspending five employees, including two branch managers, until the investigation.
It is one of the most massive banking frauds in the history of Indian banking since the Gurugram branch of Punjab National Bank in 2023. According to experts such breaches can be attributed to systemic gaps after the merger. The formation of IDFC First Bank, the result of the merger of the IDFC Bank and Capital First in 2018, has exposed the company to integration issues, such as the use of outdated IT systems and staff training disproportionate. Even a 2025 RBI audit had indicated that at the northern branches, there were moderate risks in fraud detection.
The Finance Department of Haryana issued a laconic statement late on Saturday confirming the awareness and a similar audit of all accounts linked with IDFC was ordered. It said that it lost no state funds; it was recovering, although unconfirmed reports indicate that at least Rs 120 crore was diverted subsidies going to farmers in such districts as Sonipat and Rohtak. Vigilance Bureau is ordered by Chief Minister Nayab Singh Saini to investigate the possibility of state officials being involved as insiders.
Banking analysts consider this a wake-up call to the increased application of digital forensics. A government account requires multi-factor authentication and artificial intelligence-based anomaly detection, as many middle-tier banks do not have this yet, said Rajiv Luthra, a former managing partner at Luthra and Luthra Law offices. According to RBI data, banking frauds increased by 25 percent to Rs 24000 crore in FY25 with the public sector loans being the most targeted.
The reaction of IDFC First Bank involves a three-fold approach comprising of external audit and upgrades of the entire system by Deloitte, forensic audit firm, and retraining of the workers. CEO V. Vaidyanathan managed to comfort shareholders but using video, telling them, “This one-off lapse will not derail our growth path. We already have seized 15 percent of the money in assets.
The scandal occurs against the background of tightening of RBI standards, such as the 2024 Fraud Risk Management Guidelines providing for real-time reporting. In the case of Haryana, it reveals weak points in either the Centre-states transmission of funds particularly with the state contemplating to provide a further 10,000 crore of farm loan waivers before assembly elections.
The deeper the probe, the more the stakeholders await answers on recoveries and culprits. The involvement of ED is a clue of money laundering and this may involve real estate players in Punjab and Haryana. In the meantime, the reputation of IDFC First Bank is on the line, which demonstrates the stakes of putting the protection of the public money in the context of the changing financial situation in India.
