Mumbai, February 23 The fraud involving Haryana government accounts worth Rs 590 crore is the result of collusion between employees of IDFC Bank and external parties, its Managing Director and Chief Executive, V Vaidyanathan, said on Monday.
In a specially convened call for investors and analysts ahead of the opening of the equity markets, Vaidyanathan said the bank will make some provisions as a result of the fraud and in line with its policies to recognize any stress upfront.
However, he said that this is unlikely to have a major impact on profits, pointing out that wider net interest margins and credit costs will be helpful.
"So, on a standalone basis, we were expecting a very solid Q4 in terms of profitability," Vaidyanathan said.
The Haryana government has de-empaneled IDFC First Bank and AU Small Finance Bank for government business after IDFC Bank disclosed a fraud of Rs 590 crore in the Haryana government accounts. AU Small Finance Bank has denied any wrongdoing.
Vaidyanathan said the independent forensic audit by advisory firm KPMG is expected to conclude in 4-5 weeks.
"We appointed KPMG only yesterday (Sunday)... typically, to the best of my understanding, these processes could take about 4-5 weeks to conclude," he said.
The bank has pegged the discrepancy at around Rs 590 crore, comprising Rs 490 crore identified following reconciliation and an additional Rs 100 crore that was "self-identified" through internal checks, the MD said, hinting that the amount of Rs 590 crore is unlikely to increase.
"We have put out this number as we could have assessed at this point of time -- we don't anticipate this to broadly move from here on," Vaidyanathan said.
Recoveries and "employee dishonesty insurance" cover of Rs 35 crore could reduce the impact on the bank, he said.
Describing the episode as a case of "collusion" involving employees and external parties through forged physical cheque transactions, Vaidyanathan said the issue was confined to one branch, one client group, and asserted that there was no system reporting error.
The lender has filed police complaints, informed regulators and auditors, and initiated recovery and lien-marking actions across the banking system, he said.
Vaidyanathan said that deposits from the Haryana government account form about 0.5 per cent of the bank's total deposits, while overall government deposits, including central and state entities, constitute 8-10 per cent of the deposit base.
In the three months ended December 31, 2025, the bank reported a 24 per cent jump in deposits, including a 33 per cent rise in the share of low-cost current and savings account deposits. Its net profit had zoomed 48 per cent to Rs 503 crore for the October-December period.
IDFC First Bank shares were trading 15.58 per cent down at Rs 7,054 apiece on the BSE at 11:15 hrs.
