In a major crackdown, the Government of Haryana on Sunday barred IDFC First Bank and AU Small Finance Bank from handling government business with immediate effect over an alleged fraud to the tune of Rs 590 crore.
An official notice issued by the Finance Department stated that both banks have been barred from carrying out any transactions related to the Haryana government until further orders.
All departments, boards, corporations and public sector undertakings have been asked to stop using these banks for deposits, investments or any other financial dealings.
The government order also directed them to transfer existing balances and close accounts in these two banks with immediate effect.
The state government order cited lapses in following fixed deposit instructions. It further noted that funds that were supposed to be placed in flexible deposits or higher-interest fixed deposit schemes were allegedly kept in savings accounts, leading to lower returns and financial loss to the state.
As per the order, all reconciliations must be completed by March 31, 2026, and a certified compliance report has to be submitted by April 4, 2026.
The development comes after the IDFC First Bank disclosed in a regulatory filing that it has detected a fraud of about Rs 590 crore involving certain Haryana government-linked accounts operated through its Chandigarh branch.
The bank said there were prima facie unauthorised and fraudulent activities carried out by some employees at the branch, possibly involving other individuals or entities.
According to the bank, the issue surfaced when a Haryana government department requested closure and transfer of its account balance to another bank.
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