Mumbai, Feb 23: Shares of IDFC First Bank witnessed a dramatic sell-off on Monday, plunging nearly 20% to hit the lower circuit following the bank’s disclosure of a major fraudulent transaction involving government accounts. The stock, which had previously shown stability, opened with a significant gap-down and reached an 8-month low of Rs. 66.85 as investors reacted to news of a security breach at the branch level.
The crash was triggered after the private lender informed stock exchanges that it had uncovered unauthorized and fraudulent activities at its Chandigarh branch. The discrepancy involves an estimated Rs.590 crore across a specific set of accounts belonging to the Haryana government. The issue came to light when a government department requested an account closure and fund transfer, only for the bank to discover a massive mismatch between the requested balance and the actual funds present in the account.
In response to the scandal, IDFC First Bank has suspended four officials suspected of involvement and appointed KPMG to conduct an independent forensic audit. While the bank maintains that the fraud is an isolated incident confined to a specific group of accounts and does not impact individual retail customers, the reputational damage has been swift. The Haryana Finance Department has reportedly moved to de-empanel the bank, directing state departments to shift their funds to nationalized banks.
Market analysts note that while the Rs.590 crore loss does not threaten the bank’s overall capital adequacy, the incident has raised serious red flags regarding internal controls and governance. This breach in oversight is particularly jarring for investors as the bank had recently been lauded for its strong quarterly profit growth. The stock remains under heavy selling pressure as the market awaits further clarity from the RBI and the results of the ongoing criminal investigation.
“The breach in oversight at a major branch level has shaken investor confidence. Until the forensic audit clarifies the recovery potential and regulatory bodies weigh in, the stock is likely to face continued volatility,” noted a senior equity researcher.
