New Delhi, February 23 Reserve Bank Governor Sanjay Malhotra said on Monday that the central bank is monitoring the developments surrounding the alleged fraud of Rs 590 crore at IDFC First Bank, and assured that it was not a "systemic issue".
The private sector IDFC First Bank had on Sunday disclosed a Rs 590-crore fraud committed by certain employees and others at a particular branch in Chandigarh involving a specific set of accounts belonging to the Haryana state government.
"We are monitoring the developments... there is no systemic issue here," Malhotra said in a press briefing on Monday, following the post-Budget meeting of the RBI Board of Directors with Finance Minister Nirmala Sitharaman here.
IDFC First Bank said that the fraud is "limited to a specific group of government-linked accounts within the Haryana government" operated through the said branch in Chandigarh, and emphasized that it does not extend to other customers of the Chandigarh branch.
On Saturday, IDFC FIRST Bank informed exchanges that it had received a request from a Haryana government department to close its account at a Chandigarh branch and transfer funds to another bank.
In the process, the bank observed discrepancies in the account balances and the balances mentioned by the Haryana government department. The discrepancy observed was of Rs 490 crore, and an additional Rs 100 crore was identified by the bank, bringing the total discrepancy amount to Rs 590 crore.
Shares of IDFC First Bank tumbled 20 per cent on Monday after the private sector lender disclosed a Rs 590-crore fraud committed by its employees and others in accounts held by the Haryana government.
The stock plummeted 19.99 per cent to Rs 66.85 — also its lower circuit limit — on the BSE on Monday.
The move came after the Haryana government de-empaneled AU Small Finance Bank, along with IDFC First Bank, from undertaking any government business over alleged fraudulent opening of accounts.
Shares of AU Small Finance Bank plunged 7.62 per cent to hit an intra-day low of Rs 950.50 apiece on the exchange.
Earlier in the day, the bank's management said that it had suspended the employees suspected of fraudulent activities, and so far, it has not come across the involvement of senior management.
"This is essentially a case where debit instructions supposedly came from the client, which our people – which clearly, to us, indicate the fraudulent activity – have entered and have transferred the money to certain parties outside the bank from the client's account," IDFC First Bank MD and CEO V Vaidyanathan said at a conference call with investors.
"So, this looks to us, on the basis of the work we've done, clearly, a case of employee fraud. And also our internal fingerprints and our details are quite clear that external parties are also involved here," he said.
The fraud was committed through physical transactions involving cheques, he said, adding that this "obviously happened" because of the connivance of employees.
