IDFC First Bank said it had detected irregularities in accounts related to the State government of Haryana. According to the lender, the suspected fraud took place at the branch level, wherein fraudulent cheques and manual entries were used to carry out unauthorised transactions.
Representational image (IANS)
IDFC First Bank’s investors lost about Rs 14,438 crores in market capitalisation on Monday after shares of the bank crashed as much as 20 per cent in a single session. The crash followed the discovery of Rs 590 crore fraud at a Chandigarh branch of the private sector bank.
The alleged fraud amount is higher than the bank’s last quarter’s earnings, triggering a crisis of confidence in the bank among investors.
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While the Reserve Bank of India today said there was no systemic risk to the banking system and any threat to financial stability, its Governor Sanjay Malhotra added they are closely monitoring the situation.
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IDFC First Bank said it had detected irregularities in accounts related to the State government of Haryana. According to the lender, the suspected fraud took place at the branch level, wherein fraudulent cheques and manual entries were used to carry out unauthorised transactions.
After coming to know of the irregularities, the bank conducted an internal review and suspended four employees. Further, a forensic audit by an independent auditor has also been ordered.
The bank has maintained that the Chandigarh branch misappropriation is an isolated case and it was taking steps to contain the financial impact, including following regulatory protocols.
Certain accounts have already been placed under lien marks, and recovery efforts have been initiated.
The Haryana government had earlier de-empanelled the IDFC First Bank and asked all its departments to stop routing funds through its accounts as well as withdraw existing balances. A mismatch was detected in the actual bank balances of the government accounts and the amounts that were reflected in account records.
A similar measure has also been announced by the Haryana government for AU Small Finance Bank.
IDFC First Bank Managing Director and CEO V Vaidyanathan said the irregularities were limited in scope, were a consequence of internal collusion, and not a reflection of broader structural weakness.
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