Haryana Government officially de-empanelled IDFC FIRST Bank and AU Small Finance Bank, barring them from all state government business with immediate effect.
The directive, issued by the state’s Finance Department, instructs all departments, boards, and corporations to immediately stop parking, depositing, or transacting funds through these two lenders.
The “Why”: Fraud and Policy Violations
The government’s decision was triggered by a combination of a major fraud disclosure and broader systematic lapses in how public funds were being handled.
- The ₹590 Crore Fraud: The move follows IDFC FIRST Bank’s disclosure of “unauthorised and fraudulent activities” involving a cluster of Haryana government accounts at its Chandigarh branch. The fraud surfaced when a department tried to close an account, only to find a mismatch between their records and the bank’s actual balance.+1
- “Savings Account” Gaming: The Finance Department found that several banks were ignoring instructions to place surplus government funds into high-interest Fixed Deposits (FDs). Instead, funds were allegedly being “parked” in low-interest savings accounts to benefit the banks, causing significant interest losses to the state exchequer.+1
- Reconciliation Failure: The state noted that many departments had failed to perform monthly reconciliations, which allowed these discrepancies to go undetected for an extended period.
Impact on the Banks
Both banks have seen significant fallout from the de-empanelment, though the financial scale differs:
| Bank | Haryana Govt Deposits (approx.) | Market Impact (Feb 23, 2026) |
| IDFC FIRST Bank | ₹19,800 Crore (Total state exposure) | Stock crashed 20% to hit lower circuit. |
| AU Small Finance Bank | ₹538 Crore (~0.4% of total deposits) | Stock fell over 6% on Monday. |
Key Countermeasures:
- Forensic Audits: IDFC FIRST has appointed KPMG for an independent probe. AU Small Finance Bank has initiated its own internal review but maintains that its accounts were opened following all KYC norms.+1
- Employee Actions: IDFC FIRST has already suspended four branch officials and filed a police complaint with the Haryana Crime Branch.
New State Banking Policy
In a related move on February 18, the Haryana Government tightened its overall banking rules to prevent future occurrences:
- PSU First: All new scheme and project accounts must now be opened exclusively in nationalised (public sector) banks.
- Prior Approval: Any department wishing to operate an account with a private or corporate bank now requires explicit justification and prior approval from the Finance Department.
- Strict Reconciliation: All state entities must complete a full reconciliation of their bank accounts by March 31, 2026, with a certified compliance report due by April 4.
