On Monday, February 23, 2026, shares of IDFC FIRST Bank crashed as much as 20%, hitting the lower circuit at ₹66.85 on the NSE. This massive sell-off followed the bank’s weekend disclosure of a ₹590 crore fraud at its Chandigarh branch.
The incident has wiped out approximately ₹14,000 crore in market capitalization in a single trading session.
The Disclosure: A ₹590 Crore “Internal” Fraud
The bank informed the stock exchanges on Sunday that an internal investigation uncovered “unauthorized and fraudulent activities” by employees involving specific government-linked accounts.
- The Trigger: The issue came to light when a Haryana Government department requested to close its account and transfer funds to another bank. During the reconciliation, a significant mismatch was found between the bank’s records and the department’s expected balance.
- Expanding Scope: Starting February 18, several other Haryana government entities approached the bank, leading to the discovery of additional discrepancies totaling roughly ₹590 crore.
- Confined Impact: The bank has emphasized that the fraud is localized to a specific set of government accounts at the Chandigarh branch and does not affect regular retail or other corporate customers.
Immediate Actions & Bank’s Response
IDFC FIRST Bank has initiated a high-level crackdown to recover the funds and secure its systems:
- Suspensions: Four officials at the Chandigarh branch have been placed under suspension pending a full investigation.
- Forensic Audit: The bank has appointed KPMG to conduct an independent forensic audit of the transactions.
- Police Action: A formal police complaint has been filed, and the bank is seeking to lien-mark (freeze) suspicious beneficiary accounts at other banks where the funds were transferred.
- Board Oversight: The bank’s Special Committee for Fraud Monitoring and the Audit Committee met on February 20 and 21 to review the situation.
Why the Market is Panicked
The crash reflects investor concerns over the bank’s internal controls and the scale of the financial hit:
- Earnings Impact: The ₹590 crore figure is material, representing approximately 28% of the bank’s estimated FY26 profit and more than its entire net profit for the December 2025 quarter (₹503 crore).
- Haryana De-empanelment: Following the disclosure, the Haryana Finance Department has de-empanelled IDFC FIRST Bank (and AU Small Finance Bank) for all state business, effectively halting the flow of government deposits.
- Governance Red Flags: Brokerages like Nomura have flagged concerns about branch-level controls, warning that the stock may remain under pressure until the forensic audit provides more clarity.
The RBI’s “No Systemic Risk” Assurance
In an effort to stabilize the markets, RBI Governor Sanjay Malhotra stated on Monday afternoon that the central bank is watching the situation but sees “no systemic issue” in the broader banking sector. This indicates the RBI views it as an isolated case of manual collusion rather than a structural failure.
“The bank is determined to get to the root of the issue… we will spare no one.” — V. Vaidyanathan, CEO of IDFC FIRST Bank.
