Haryana Government Bars IDFC First Bank and AU Small Finance Bank After Rs 590 Crore Fraud Disclosure

Immediate Ban on Government Transactions in Haryana​

Haryana Government has removed IDFC First Bank and AU Small Finance Bank from handling all government business in the state with immediate effect, following the disclosure of an alleged fraud of around Rs 590 crore.

In an official circular issued on Sunday, the state government prohibited both lenders from conducting any government-related transactions in Haryana until further orders. All departments, boards, corporations, and public sector undertakings have been directed to stop using these banks for deposits, investments, or any other financial dealings.

Authorities have also been instructed to transfer existing balances immediately and close all accounts maintained with the two banks.

Finance Department Flags Deposit Lapses​

The Finance Department highlighted lapses in adherence to fixed deposit instructions. It noted that in certain instances, funds meant to be parked in flexible deposits or higher-interest fixed deposit schemes were allegedly retained in savings accounts. This reportedly resulted in lower returns and financial losses to the state exchequer.

To prevent further discrepancies, departments have been directed to strictly follow approved deposit terms and verify bank compliance on a regular basis. Monthly reconciliations are now mandatory, and any irregularities must be reported without delay.

All reconciliations are required to be completed by March 31, 2026. A certified compliance report must be submitted by April 4, 2026.

Fraud Linked to Haryana Government Accounts​

The state’s action follows a regulatory filing by IDFC First Bank, which disclosed that it had detected a fraud of approximately Rs 590 crore involving certain Haryana government-linked accounts operated through its Chandigarh branch.

The bank stated that prima facie unauthorized and fraudulent activities were carried out by some employees at the branch, potentially involving other individuals or entities.

The issue surfaced when a Haryana government department sought closure of its account and transfer of the balance to another bank. During the process, discrepancies were found between the amount mentioned in the request and the actual account balance.

From February 18 onwards, similar discrepancies were identified in other government-linked accounts.

Internal Review and Investigation Underway​

IDFC First Bank clarified that its preliminary internal review indicates the issue is confined to a specific group of Haryana government-linked accounts handled by the Chandigarh branch. It stated that other customers are not affected.

The total amount under reconciliation across the identified accounts is estimated at around Rs 590 crore. The final figure will be determined after further validation and potential recoveries.

Four bank officials have been suspended pending investigation. The bank has stated that it will pursue strict disciplinary, civil, and criminal action against those found responsible.

As part of recovery efforts, recall requests have been issued to certain beneficiary banks to lien-mark balances in suspicious accounts. The statutory auditors have been informed, and an independent external agency will conduct a forensic audit.

The developments mark a significant escalation in the alleged fraud case and have prompted immediate administrative and financial controls by the Haryana Government to safeguard public funds.