. Explainer
(RPTING DI38 IN DC FILE)
Jayanta Roy Chowdhury
The arrest of four individuals suspected of involvement in a scam which unfolded in Haryana Government’s accounts with IDFC First Bank’s Chandigarh branch may be the tip of the iceberg, according to investigators, more arrests of both bankers and officials are likely.
An internal review by the bank estimated the suspected fraud of nearly Rs 590 crore, though the final figure remains subject to reconciliation.
The IDFC First Bank in a letter to the National Stock Exchange dated Wednesday has stated, “Even though the investigation in the matter is ongoing, we have paid out 100 per cent of the principal and interest to the relevant departments of the Haryana government, which works out to a net amount of Rs 583 crore.”
The fraud has till now prompted the setting up of a high level probe committee by the state government, arrests and forensic audit, has even come to the notice of the Reserve Bank of India, which is one of the first to take note of any major banking fraud, to see whether its regulatory vigil has been breached.
The fraud broke in mid-February 2026 after a Haryana government department sought to close certain accounts and transfer funds. While this was on, discrepancies were found between the balances reported in official records and the actual funds available in the bank accounts. The question of where the missing monies was then frantically traced.
The alleged irregularities were confined to a specific set of government-linked a
ccounts, and did not affect other customers at the branch, the bank has said.
What seemed to have happened according to initial findings cited by investigators, the scam involved unauthorised transactions carried out by certain bank employees, possibly in collusion with external parties.
Funds were allegedly diverted from government accounts to beneficiary accounts linked to entities created by the accused. What is being probed now is whether there were more people behind the curtains involved in this massive fraud.
Forensic auditors are examining transaction trails to determine the exact modus operandi, including how internal controls which may have been bypassed and the period over which the diversions took place.
IDFC First Bank, of course, has taken a number of steps already, which include suspension of four employees, a police complaint, initiation of steps to recall funds from suspicious beneficiary accounts, going ahead with a stringent forensic audit by an external agency, and setting up a special committee of its board to oversee the probe.
The Haryana government has for starters de-empanelled IDFC First Bank, and barred it from handling further state government business. The state’s Anti-Corruption Bureau is probing the diversion of funds to firms, allegedly created by the accused. A high-level government committee has also been formed to oversee the investigation.
The case raises questions about internal controls at banks handling government funds, especially in smaller branches. It may also lead to tighter scrutiny of reconciliation processes, dual authorisation systems and real-time monitoring of high-value government accounts.
For IDFC First Bank, the episode comes at a time when private lenders are expanding their government and institutional banking portfolios. The outcome of the forensic audit and regulatory review could determine whether additional compliance lapses are found.
The investigation is ongoing, and both the final loss figure and the extent of individual culpability remain subject to official findings.
. JRC RSA