IDFC FIRST Bank selects KPMG for forensic audit of Rs 590-cr fraud after Haryana government suspends business ties

IDFC FIRST Bank has formally engaged KPMG to carry out an independent forensic audit, following a significant directive by the Haryana government to immediately de-empanel it, along with AU Small Finance Bank, from handling government business. The decision was prompted by alleged unauthorised activities totalling approximately ₹590 crore in government-linked accounts at the bank’s Chandigarh branch. The incident has raised concerns about financial governance and the procedures in place for managing public funds. The bank’s prompt disclosure of the issue and appointment of a third-party auditor signal an effort to uphold transparency and regulatory compliance, with the outcome of the audit expected to clarify the nature and extent of the irregularities.

Haryana government's directive

The Haryana government issued instructions on 18 February, instructing all administrative secretaries, departmental heads, deputy commissioners, and managing directors to cease all financial dealings with IDFC FIRST Bank and AU Small Finance Bank. No government funds are to be parked, deposited, invested, or transacted through these two banks until further notice. This move follows the discovery of financial discrepancies in certain government-linked accounts and reflects the state’s intent to safeguard public resources while investigations are underway.

“All concerned departments and organisations shall take immediate action for transfer of balances and closure of accounts maintained with the above banks,’’ the instructions said. The directive required prompt action across all government entities to relocate balances and close existing accounts, impacting daily operations and the financial landscape for both banks and associated government departments. These actions are viewed as precautionary measures while the matter is further scrutinised.

The bank disclosed that its preliminary internal assessment identified the issue as confined to a specific group of government-linked accounts operated through the Chandigarh branch, and does not impact other customers of the branch. The total amount currently under reconciliation across these accounts is approximately ₹590 crore. The final financial impact remains contingent on the validation of claims, recoveries — including through the marking of liens on accounts at other banks — and the legal recovery process.

“The state government has referred the matter to Haryana crime branch for investigation,” officials said. The funds in question reportedly belonged to the development and panchayats department. The involvement of law enforcement aims to ensure a comprehensive examination of the circumstances, the roles of various stakeholders, and to facilitate recovery efforts as per legal protocols.

Officials suspended

In its regulatory filings with the National Stock Exchange of India Limited and BSE Limited, IDFC FIRST Bank stated that it has suspended four officials suspected of involvement in the unauthorised transactions and has filed a formal complaint with police authorities. The bank clarified that statutory auditors have been informed and that a Special Committee of the Board for Monitoring and follow-up of cases of frauds (SCBMF) convened on 20 February, followed by meetings of the audit committee and the board of directors on 21 February.

“The Bank is in the process of appointing an independent external agency to conduct an independent forensic audit. The statutory auditors have been informed. A meeting of the Special Committee of the Board for Monitoring and follow-up of cases of frauds (SCBMF) was convened on February 20. The meeting of the audit committee and the board of directors were convened on February 21," the bank said in its regulatory filing. The bank emphasised that the discovery was made following a request from a Haryana government department for account closure and the transfer of funds, during which discrepancies between the stated account balances and actual funds were identified.

The appointment of KPMG as the independent forensic auditor was communicated to the stock exchanges in accordance with Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as updated by the SEBI Master Circular dated 30 January 2026. The bank confirmed that the relevant disclosures have been uploaded to its official website, in compliance with regulatory norms. The communication was signed by Satish Gaikwad, General Counsel and Company Secretary of IDFC FIRST Bank, and highlights the bank’s intent to ensure regulatory transparency during the audit process.