IDFC First Bank has expressed regret over the recent misappropriation of funds of ₹590 crore at its Chandigarh branch and said it is determined to ensure that such an incident does not happen again.
“The incident has reinforced in us the requirement to be more vigilant and never to be too sure of ourselves or our controls. We are determined not to let such an incident come our way again,” Managing Director & CEO V. Vaidyanathan said in a letter to shareholders.
Controls tightened immediately
The fraud, discovered in February 2026, involved certain bank employees colluding with employees of a customer and third parties.
“It was a serious incident and should not have happened,” he said, adding that the bank responded with speed and transparency by disclosing the incident on February 21 and holding an analyst call on the next working day.
Quick response
The bank also compensated the counterparty on a principle basis on the same working day, without waiting for lengthy investigations.
“We did not take shelter behind lengthy investigations. Within the same working day, we compensated the counterparty on a principle basis,” he said.
Fraud found to be isolated
The CEO said that an independent forensic investigation by KPMG was commissioned to establish the facts, identify the root causes, determine accountability and recommend measures to strengthen controls.
The investigation confirmed that the fraud involved certain employees and former employees at the Chandigarh branch, employees of customers, including departments of State Governments, and third parties.
Additional safeguards added
The investigation also confirmed that the incident was isolated to a single branch and that similar incidents had not been observed at other branches.
The bank has since introduced additional preventive controls, including centralised oversight alongside branch-level authorisation, enhanced customer communication and technology-led control mechanisms.
Retail deposits remain firm
A nationwide verification exercise was also undertaken covering relevant Government and TASC account holders. No discrepancies or claims were received from other customers.
According to him, the bank uses technology for anti-money laundering, mule account detection and transaction monitoring, supported by advanced machine learning models for pre- and post-onboarding monitoring.
Over seven years, the share of retail deposits has risen from 27% to 80%. Despite a reduction in savings account interest rates during Q1 FY27, deposits remained firm with the bank.
Chairman’s message
“We encountered an incident at a particular branch in Chandigarh during the year. The Bank responded with complete transparency, taking swift corrective actions and engaging directly with those affected to ensure that the resolution was fair, humane and accountable,” said Chairman Sanjeeb Chaudhuri.