On Monday, February 23, 2026, RBI Governor Sanjay Malhotra officially confirmed that there is “no systemic issue” in the Indian banking sector following the disclosure of a ₹590 crore fraud at IDFC FIRST Bank.
Speaking at a press briefing after the customary post-budget address by Finance Minister Nirmala Sitharaman, the Governor stated that the central bank is “watching the development” closely but views it as a localized incident.
RBI’s Stance: Monitoring vs. Systemic Risk
The central bank’s quick clarification aimed to prevent panic among depositors and investors, as IDFC FIRST’s stock plummeted 20% during morning trade.
- Isolated Incident: The RBI echoed the bank’s internal assessment that the fraud was limited to a specific cluster of Haryana Government accounts at a single branch in Chandigarh.
- Supervisory Oversight: Governor Malhotra noted that the RBI’s supervisory teams are engaged with the bank’s management to ensure that recovery protocols and forensic audits are being executed correctly.
- No Contagion: The “no systemic issue” label indicates that the RBI does not see this as a failure of the broader UPI or banking software infrastructure, but rather a case of manual branch-level collusion involving forged instruments.
Market Reaction & Impact
Despite the RBI’s reassurance, the bank’s stock faced a “lower circuit” lock on Monday, reflecting deep investor concern over internal controls.
| Metric | Detail (as of Feb 23, 2026) |
| Share Price Crash | 20% (to ₹66.85) |
| Market Cap Loss | ~₹14,400 Crore wiped out in one session. |
| Haryana Gov Outflow | Estimated ₹200 crore already moved out following de-empanelment. |
| Potential Total Outflow | Analysts expect up to ₹2,000 crore in government deposits may shift to PSU banks. |
The CEO’s Defense
In an investor call earlier today, MD & CEO V. Vaidyanathan provided further technical details to support the “isolated” narrative:
- Manual Forgery: The fraud involved forged cheques and fraudulent authorization letters that were manually processed at the branch.
- Bypassing the Digital Stack: Because the transactions were manual, they bypassed some of the automated digital flags that typically catch electronic siphoning.
- High Buffers: Vaidyanathan insisted the bank has high liquidity buffers and that a solid Q4 performance (driven by lower credit costs) would help “absorb” the ₹590 crore hit without a material dent in long-term stability.
“We have been in operation for over 10 years and have rolled out over 1,000 branches and have had no such incident before… This is an isolated instance.” — V. Vaidyanathan, CEO of IDFC FIRST Bank.
