The Truth Behind IDFC FIRST Bank Scam: Rs 590-Crore Fraud Uncovered in Chandigarh
IDFC FIRST Bank is under fire after a Rs 590-crore fraud was detected at its Chandigarh branch. With four arrests made and the Haryana government de-empanelling the bank, investors are panicking. We break down the scam, how the money was siphoned and what this means for the bank's future.
The Indian banking sector was rocked this week as IDFC FIRST Bank disclosed a massive Rs 590-crore fraud at its Chandigarh branch. The scam, involving the siphoning of Haryana government funds, has led to the arrest of a former bank manager and three others, triggering a massive sell-off in IDFC FIRST Bank shares.
If you are an investor or a customer wondering if your money is safe, here is a deep dive into the IDFC FIRST Bank scam, the investigation updates and the impact on the bank's future.
How the Rs 590-Crore IDFC FIRST Bank Fraud was Detected
The fraud surfaced on February 22, when IDFC FIRST Bank disclosed a regulatory filing regarding discrepancies in Haryana government-linked accounts.
The discovery happened when a specific government department requested to close its account and transfer the balance to another bank. During the process, bank officials discovered a glaring mismatch between the reported amount and the actual balance.
The Timeline of the Scam
- September 26, 2025: Two accounts were opened at IDFC FIRST Bank and AU Small Finance Bank under the MMGAY-2.0 scheme with initial deposits of Rs 50 crore and Rs 25 crore, respectively.
- January 13, 2026: Letters were issued to close these accounts and transfer the funds (plus accrued interest) to Axis Bank.
- January 16, 2026: While AU Small Finance Bank successfully transferred over Rs 25.45 crore, IDFC FIRST Bank transferred only Rs 1.27 crore before closing the account.
This massive discrepancy triggered the deeper investigation that revealed the full Rs 590-crore scale of the fraud.
Investigation Findings: How Was the Money Siphoned?
Early investigations reveal a "clear case of employee fraud" involving external parties. The primary method used was the processing of forged cheques and fraudulent debit instructions.
- Forged Signatures: Cheques bore the forged signatures of the former Director General (Developments and Panchayats), who had already relinquished his charge in October 2025.
- Bypassing Digital Methods: Money was moved using physical cheques and debit notes that lacked proper memo or dispatch numbers.
- Clerical "Errors": In one instance, a cheque for Rs 2.50 crore (in figures) was honored despite the words written as "Rupees twenty five."
Managing Director and CEO V. Vaidyanathan confirmed that while the instructions appeared to come from the client, they were entirely fraudulent and processed by employees in connivance with outsiders.
Who Are the Masterminds? (Recent Arrests)
As of February 25, 2026, four individuals have been arrested in connection with the scam:
- Ribhav Rishi: Former Manager at IDFC FIRST Bank (alleged mastermind).
- Abhay Kumar: Former Relationship Manager at the bank.
- Swati Singla & Abhishek Singla: Partners in a private firm that reportedly received over Rs 300 crore of the stolen funds.
Market Impact: IDFC FIRST Bank Share Price Crash
The news of the scam had an immediate and severe impact on the bank's market standing. On Monday, IDFC FIRST Bank shares crashed 20%, hitting the lower circuit. Approximately Rs 14,300 crore in investor wealth was wiped out in a single trading session.
Current Status & Recovery
The bank has taken swift action to mitigate the damage:
- Full Repayment: IDFC FIRST Bank has already repaid 100% of the principal amount claimed by the Haryana government.
- Recovery: Chief Minister Nayab Singh Saini confirmed the recovery of Rs 556 crore plus nearly Rs 22 crore in interest within 24 hours.
What’s Next for IDFC FIRST Bank?
The Haryana Government has officially de-empanelled IDFC FIRST Bank from all state business, leading to an immediate Rs 200 crore outflow of state funds.
"No government funds will be parked, deposited, or transacted through these banks until further notice," stated the official circular.
The loss of government deposits comes at a time of tight liquidity across the industry. While loan demand is surging, deposit growth has failed to keep pace. So, as low-cost CASA (Current Account Savings Account) deposits decline, the bank may face higher funding costs, which could squeeze profit margins.
Moreover, the reputational risk remains substantial. Until KPMG concludes its forensic audit, IDFC FIRST Bank will continue to operate under heightened scrutiny. The coming weeks will be critical in determining whether the bank can rebuild institutional confidence and stabilise its deposit base.
Should You Buy, Hold or Sell IDFC FIRST Bank?
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