Rs 590 Crore Fraud: IDFC First Bank Management Responds

Private lender IDFC First Bank in an analyst call held on Monday, said called Rs 590 crore fraud detected at its Chandigarh branch as an isolated case, while noting that the banks has opened over 1,000 branches in the last five years and has never found an incident of this nature.

MD and CEO of IDFC First Bank, V Vaidyanathan, said “We will spare no one. And we have quickly moved in. We have appointed a forensic auditor for this, KPMG. And we will expect them to move in with great diligence and move very fast. And we will take the full support of the law enforcement of the country."

On Monday, the shares of IDFC First Bank fell as much as 20% to hit an intra-day low of Rs 66.85 apiece on BSE, after the regional-level fraud came to light.

Meanwhile, the Mumbai-headquartered bank has suspended personnel involved in this matter. Additionally, the regulators and auditors have been informed of the matter, police complaints filed, and other law enforcement agencies are being engaged to investigate the matter.

Also Read: ₹590 Cr Fraud Rocks IDFC First Bank; Shares Hit Lower Circuit at ₹66.85

"This matter pertains to a particular branch in Chandigarh and is confined to a limited set of Haryana government-linked accounts. The main issue which we have observed here is that certain employees of this branch, most possibly in connivance with external parties, have fraudulently transferred these amounts to beneficiaries who had accounts out— outside of our bank," Vaidyanathan noted in an analyst call held today.

Further, the bank's top management noted that, "these accounts are also expected to be suspicious". These were— could be done in connivance with third parties, the details of which will emerge post the forensic audit.

‘Oldest Kind Of fraud’ Detected At IDFC's Chandigarh Branch

On whether the Rs 590 crore IDFC fraud case could lead to the detection of similar instances, V Vaidyanathan said, "I can assure you that this issue is confined to only this branch. There is no impact as such on any other customer or any other branch which has come to our notice. In terms of financial impact, uh, the discrepancy currently found is about ₹490 crores.

"We have additionally— where we have received, uh, I would say, uh, certain, uh, uh, reconciliation requirements. So then through the reconciliation, we observe that there is a discrepancy of ₹490 crores. In— we have additionally estimated ₹100 crores. That's how it comes to ₹590 crores of impact," he said.

While noting that this bank has never "seen an instance like this, of this order of magnitude", it said that the Rs 590 crore Chandigarh branch fraud case was "a case of an employee fraud with "external parties" being involved as well.

"This is a physical transaction where people have come, you know, the checks have been forged. This is the, like we say, the oldest kind of fraud probably known to banking. So how this has happened is obviously happened with the connivance of employees. There is maker, checker, authorized— the whole system exists, but obviously there's some, you know, bunch of people who come together and make it happen," it noted.

As of 12:42 pm. the shares of IDFC First Bank were trading 16.12% lower at Rs 70.09 apiece.