Haryana Chief Minister Nayab Singh Saini and Reserve Bank of India (RBI) Governor Sanjay Malhotra on Monday assured that the money was safe. ₹A fraud of Rs 590 crore related to state government accounts came to light in IDFC First Bank.
CM Saini told the Assembly in Chandigarh that the money involved in the IDFC First Bank case “will definitely come back”. He also told the House that the case has been handed over to the Anti-Corruption Bureau (ACB) and the Vigilance Department, news agency PTI reported.
He further said that IDFC First Bank had communicated with the Securities and Exchange Board of India (SEBI) and claimed that an employee was responsible for the irregularities.
In New Delhi, RBI Governor Sanjay Malhotra said the central bank was “keeping an eye on developments” in the matter but assured the public that “there is no systemic issue”. Thus, he clarified that the fraudulent activity was limited to a specific group of accounts and did not indicate a widespread failure within the national banking system.
This statement of RBI comes after the revelations made by IDFC First Bank on Sunday about the irregularities found in its Chandigarh branch.
nub of ₹590 crore question
The report said the suspected fraud was first detected when a Haryana government department requested IDFC First Bank’s Chandigarh branch to close its account and transfer the balance to another institution.
The bank noticed a significant difference between the balance reported by the department and the actual money held in the account, Hindustan Times reported.
Deficiency identified in preliminary assessment by the Bank ₹490 crores. Further internal reviews conducted by the lender identified an additional ₹Irregularities amount to Rs 100 crore, bringing the total estimated discrepancy ₹590 crore.”>Approx. ₹590 crores.
HT reported that the bank’s regulatory filings to the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) specified that these irregularities were limited to a specific group of government-linked accounts and did not affect other branch customers.
How was ‘fraud’ given?
IDFC First Bank Managing Director and CEO V Vaidyanathan explained the details of the alleged fraud during a conference call with investors, PTI reported. Vaidyanathan described the incident as a case of “employee fraud” involving collusion between bank employees and external parties. Physical transactions involving checks were used in the fraudulent activity, he said.
The CEO said that the bank’s internal “fingerprints” and data clearly indicated the involvement of outside entities. He said that the bank management has currently not found any evidence of the involvement of its senior leadership.
Action and reaction so far
It is said that after the irregularities were detected, the Haryana government has taken immediate administrative action. On February 18, the state finance department issued instructions to remove IDFC First Bank and AU Small Finance Bank from the panel with immediate effect. These instructions were issued by the concerned Additional Chief Secretary, and all state departments, boards and public sector undertakings were directed to close all business with both the banks.
Although the Finance Department’s initial instructions did not give any reason for the move, Saini confirmed in the Assembly that the de-empanelment was a direct response to the fraud discovered.
IDFC First Bank has suspended four officials on suspicion of being involved in fraudulent transactions. The bank has also filed a formal police complaint and informed the banking regulator. It said that to ensure objective investigation, the bank is appointing an independent external agency to conduct a forensic audit.
The bank’s regulatory filing said its statutory auditors had been informed about the discrepancies. It said the internal oversight committees, including the special committee of the board to monitor and follow up on fraud cases, met on February 20, followed by the audit committee and board of directors meetings on February 21.
The revelations of the alleged fraud had an immediate impact on the stock market like the shares of IDFC First Bank It fell by almost 20% on Monday, reaching the lower circuit limit ₹66.85 on BSE. Shares of AU Small Finance Bank, which was also named in the state government’s de-empanelment order, fell 7.6% to intra-day low. ₹950.50.
Political demand for accountability
The issue became a point of debate in the Haryana Assembly on Monday, where opposition leader and Congress MLA Bhupinder Hooda raised concerns over the security of state funds. HUDA said the bank has detected irregularities, but the government should give full details of the actions taken to safeguard the public treasury.
In response to the opposition, Saini reiterated that the investigation is being conducted with transparency by the state government. He confirmed that the state crime branch is investigating the case along with the ACB. Saini assured the members that the government will not take this issue lightly and any employee found involved in this will face strict consequences.
