Inside the ₹590Cr IDFC First Fraud Case: How Insiders Bypassed 'Maker-Checker' Rules to Siphon Govt Funds

What began as a routine request to close a government-linked bank account has exploded into one of the most significant branch-level frauds to hit a private sector lender in recent years. A ₹590-crore hole discovered in accounts linked to departments of the Haryana government has led to arrests, a regulatory spotlight, the de-empanelment of the bank for state business, and a near 20% crash in the lender’s stock price in a single trading session.

Investigators now say the fraud was a sustained siphoning of public funds through forged cheques, manipulated debit instructions, and an alleged collapse of internal checks at the Chandigarh branch of IDFC FIRST Bank.

How The Fraud Came To Light

The fraud surfaced in January 2026 when a Haryana government department requested the closure of a scheme-linked account. They asked for the balance, along with accrued interest, to be transferred to another bank. The account had originally received ₹50 crore in September 2025 under a government programme. A parallel deposit of ₹25 crore had been placed with AU Small Finance Bank under the same scheme.

When closure instructions were executed, AU Small Finance Bank transferred approximately ₹25.45 crore, including interest, and closed the account without incident.

However, IDFC FIRST Bank transferred only about ₹1.27 crore before closing the account. The mismatch triggered an immediate alarm within the department and led to scrutiny of multiple other linked accounts.

What investigators uncovered was cumulative unauthorised debits amounting to nearly ₹590 crore.

Forged Cheques and Manipulated Debit Notes

According to the FIR and preliminary findings, the siphoning occurred through repeated processing of physical cheques and debit notes. They had forged the signatures of a senior Haryana government official who had left charge months earlier. Several of the instruments reportedly lacked memo numbers or dispatch records.

In one instance cited in the complaint, a cheque showed ₹2.50 crore in figures but carried the words “Rupees twenty five” in the written field. Despite the discrepancy, the instrument was processed and cleared. Authorities suspect that funds were transferred to beneficiary accounts outside the bank, including accounts linked to private entities. The transactions were spread out and layered, suggesting an attempt to avoid detection through staggered withdrawals rather than a single large transfer.

At the centre of the case is what investigators describe as a breakdown, or deliberate bypassing, of the banking industry’s “maker-checker” control system. This dual-control mechanism requires one official to initiate a transaction, and then another independent official to verify and approve it.

In this instance, officials believe insiders may have colluded to process fraudulent debit instructions. Managing Director and CEO of IDFC First, V Vaidyanathan, has termed the incident a case of “employee fraud” with possible involvement of external parties. Preliminary probes suggest at least 391 suspect transactions across more than 170 accounts are being examined as part of the wider trail. The fact that the irregularities were detected only when the client sought account closure has raised serious governance questions.

The Haryana State Vigilance and Anti-Corruption Bureau has arrested four individuals in connection with the case. Those arrested include former branch manager Ribhav Rishi, ex-employee Abhay Kumar, and Chandigarh-based Swati Singla and Abhishek Singla. Investigators allege that shell entities may have been created to receive and route diverted funds.

A Lookout Circular had been issued against Rishi before his arrest. Authorities are examining whether additional insiders or external collaborators were involved and whether funds were further layered or withdrawn after diversion. Accounts linked to the accused have reportedly been frozen as agencies trace the money trail.

₹583 Crore Repaid Within 24 Hours

Haryana Chief Minister Nayab Singh Saini informed the Assembly that ₹556 crore of principal, along with approximately ₹22 crore in interest, had been credited back to the respective departments within 24 hours through coordinated efforts.

In a public statement, the bank said it chose to reimburse the full claimed amount without waiting for investigative closure, citing its “customer-first” principles.

Market Fallout

Despite the reimbursement, investor confidence took a sharp hit. Shares of IDFC First Bank plunged 19.99 per cent to ₹66.85, marking their steepest single-day fall in recent memory and hitting the lowest level since October 2025. Nearly ₹14,300 crore in market capitalisation was wiped out in one session.

The Haryana government has since de-empanelled IDFC FIRST Bank from handling state government business and shifted deposits elsewhere. While government-linked deposits form only around 0.5% of the bank’s total deposit base, reputational damage could have broader implications if other institutional clients reassess exposure.

The bank has already reported deposit outflows of around ₹200 crore following the disclosure. Forensic auditors, including KPMG, are now reviewing transaction logs, authorisation hierarchies, and internal audit trails to determine how such a large-scale diversion went undetected for months.

Also read: ₹590 Crore IDFC First Fraud Case: Ex-Manager Among Four Arrested