IDFC First Bank, AU Small Finance slump up to 20% in early trade; what investors should do

Shares of IDFC First Bank Ltd and AU Small Finance Bank Ltd witnessed sharp declines in Monday's early trade after both private lenders came under the scanner of the Haryana government following the detection of fraud linked to certain government accounts.

IDFC First Bank shares tumbled 20 per cent to hit a day's low of Rs 66.85, while AU Small Finance Bank slipped 7.62 per cent to Rs 950.50 level.

Over the weekend, IDFC First Bank disclosed that it had identified a fraud of around Rs 590 crore involving certain Haryana government-linked accounts operated through a branch in Chandigarh. The bank clarified that the incident is isolated to one specific group of government-linked accounts and does not extend to other account holders.

The lender said an investigation has been initiated and four officials have been placed under suspension pending the outcome of the probe. The matter has also been referred to the Special Committee of the Board for Monitoring and Follow-up of Cases of Fraud.

AU Small Finance Bank, in a separate exchange filing, said it has initiated an internal review after the Haryana government sought clarification regarding certain suspicious transactions relating to one specific account involving the state's finance department and a customer account.

"As on February 17, 2026, the Bank had total deposits of ~Rs 735 crore from Government of Haryana which has reduced to ~Rs 538 crore as on February 21, 2026 across ~200 accounts (~0.4 per cent of Bank's overall deposits as on December 31, 2026), post this de-empanelment," it stated.

Reacting to the steep fall, market expert Avinash Gorakshakar told Business Today, "I think it's a big negative surprise because ever since CEO V Vaidyanathan took over the bank, this is the first such fraud incident at IDFC First Bank. The trust factor is something the markets will obviously take into account. AU Small Finance Bank has also clarified that it does not have a large deposit base from the Haryana government. However, we will have to see what kind of impact this has on the core numbers, as the amount will need to be provisioned in the Q4 results. We will have to wait for more clarity. In qualitative terms, these stocks may underperform for some time. Investors should adopt a wait-and-watch approach rather than take a hurried decision."

Ravi Singh, Chief Research Officer at Mastertrust, also advised investors to adopt a wait-and-watch strategy on IDFC First and AU Small Finance in the medium to short term.

Kranthi Bathini, Equity Strategist at WealthMills Securities, echoed a similar view for both the counters.