AU Small Finance Bank Denies Wrongdoing After Haryana De-Empanels It Over Alleged Account Fraud

New Delhi, February 23: AU Small Finance Bank has denied any wrongdoing in connection with the alleged fraudulent opening of accounts after the Haryana government de-empaneled it from undertaking government business in the state.

In a circular issued by the finance department, the Haryana government stated that both AU Small Finance Bank and IDFC First Bank are de-empaneled for government business in Haryana with immediate effect until further orders.

The action follows a disclosure by IDFC First Bank regarding a Rs 590 crore fraud committed by its employees and others in accounts held by the Haryana government with the lender.

AU Small Finance Bank Details Account Opening and Transactions​

Responding to the development in a regulatory filing late Sunday evening, AU Small Finance Bank said the government account under scrutiny was opened after completing all necessary KYC checks and authorizations.

According to the bank, the account was initially credited with Rs 25 crore transferred from a large private sector bank. Subsequently, an additional Rs 47 crore was received through multiple transactions from another private sector bank, identified as IDFC First Bank.

Of the total credits received, Rs 47 crore was transferred to a customer account through 14 separate transactions. The bank stated that, based on preliminary findings, all 14 transactions were initiated by the concerned Haryana government department, duly authorized, and executed in accordance with instructions provided by the department in the normal course of business.

Audit Trail, Documentation and Account Closure​

The bank said it maintains a complete audit trail of the account, including account opening forms, KYC documentation, cheques, transaction instructions, verification call details, and supporting records. These details have been submitted to the concerned government department.

The account was closed on January 15, 2026, following instructions from the department. The outstanding balance of Rs 25 crore, along with accrued interest, was transferred back to the original large private sector bank.

The bank stated that, based on available facts and its preliminary review, there is no indication of any financial impact or fraudulent activity towards the bank.

Internal Review Underway; Deposits Decline After De-Empanelment​

AU Small Finance Bank informed that its board has been apprised of the matter and that an internal review is ongoing to ensure a fair and transparent assessment. Certain employees have been placed off duty as part of this process.

As of February 17, 2026, the bank held total deposits of Rs 735 crore from the Haryana government. This figure declined to Rs 538 crore as of February 21, 2026 across accounts, representing 0.4 percent of the bank’s overall deposits as on December 31, 2026, following the de-empanelment.

The bank reiterated its commitment to strong governance, transparency, and safeguarding of public funds. It said it will continue to engage with the Haryana government for re-empanelment and maintain communication with stakeholders regarding the matter.