The ₹646 crore fraud at IDFC First Financial institution’s Chandigarh department prompted an unusually direct response from the lender’s high administration, with managing director and chief govt V. Vaidyanathan flying to town inside days of the incident turning into public to fulfill senior administrative officers and guarantee them the financial institution would do the suitable factor.
“For the reason that matter was critical, I personally flew to Chandigarh the identical day and met senior administrative officers. I assured them of the Financial institution’s bona fides, our tradition and our dedication to doing the suitable factor,” Vaidyanathan wrote in his letter to shareholders within the financial institution’s annual report for fiscal 12 months 2026 (FY26), launched on Sunday.
He stated the officers appreciated the financial institution’s swift response and its willingness to simply accept accountability the place its personal staff had been concerned. He additionally stated senior officers later wrote to the financial institution in appreciation, with one remarking that they’d recognized of AAA banks, these with the very best credit standing and lowest threat of default, by monetary power, however that this was the primary they’d seen that was AAA by ethical conduct.
The fraud, found in February 2026, concerned staff at a single Chandigarh department colluding with buyer representatives and outsiders. Vaidyanathan devoted a piece of his letter to the episode, saying plainly that it shouldn’t have occurred.
Controls bypassed
The incident uncovered the boundaries of even a technologically superior management framework when a number of events collude, Vaidyanathan stated. The financial institution makes use of machine-learning fashions to watch accounts and transactions, however on this case, a number of events acted collectively to avoid controls already in place.
The fraud was disclosed late on 21 February, a Saturday, with the financial institution holding an analyst name at 8 am the next Monday. Vaidyanathan stated the financial institution compensated the affected counterparty throughout the identical working day, on a matter of precept, quite than ready for a prolonged investigation as a result of its personal employees had been concerned.
Mint reported earlier {that a} forensic evaluate by KPMG, code-named Project Ultra, had reaffirmed that the fraud was confined to the Chandigarh department. The evaluate discovered that the modus operandi concerned collusion between department staff, sure staff of the purchasers and sure people outdoors the financial institution.
To push by unauthorized transactions, department employees on the time connected probably modified authorisation letters, cheques and approval emails to transaction vouchers, with signature inconsistencies seen in some instances, in line with the report.
In sure situations, non-existent fastened deposit advices, edited curiosity certificates and modified account statements had been then shared with clients.
The discrepancy surfaced in February when a Haryana authorities division sought to shut its account and transfer the funds elsewhere, solely to search out that the stability differed from what the account holder believed it to be.
The Warburg Pincus-backed lender has stated it was a sufferer of the fraud and is working with investigative authorities. It paid the quantity, together with relevant curiosity, to the departments involved and acknowledged the price in its books within the March quarter of FY26.
Harm to earnings
Vaidyanathan stated core banking information remained correct all through. The financial institution subsequently performed a nationwide verification train, sending statements of closing balances as of 28 February 2026 to all related authorities and belief, affiliation, society and membership account holders throughout India. No different buyer reported a discrepancy.
The financial institution has since added controls, together with oversight by a centralised crew on high of branch-level authorisation, in addition to modifications to the way it communicates with clients.
The monetary price of the fraud was mirrored within the financial institution’s annual outcomes. Web revenue for FY26 rose 7% from a 12 months earlier to ₹1,636 crore, which Vaidyanathan described as underwhelming. With out the fraud, he stated, revenue would have been ₹2,119 crore, a 39% enhance.
Deposits held agency by the episode, Vaidyanathan stated, even because the financial institution minimize savings-account charges across the identical time.
