A ₹590-crore fraud involving accounts of Haryana government departments in IDFC First Bank has hit headlines, forcing chief minister Nayab Singh Saini to issue a statement amid concerns whether the money is safe or not.
Haryana chief minister Nayab Singh Saini said on Tuesday the amount deposited with IDFC First Bank has been recovered, including interest, within 24 hours of the fraud coming to light.
On Monday, the CM and Reserve Bank of India (RBI) governor Sanjay Malhotra gave assurances that the money is safe, after the alleged ₹590-crore fraud involving state government accounts came to light at IDFC First Bank.
What is the alleged IDFC fraud?
Private sector lender IDFC First Bank first disclosed the detection of the suspected fraudulent transactions on Saturday, saying these amounted to ₹590 crore at one of its Chandigarh branch and involved accounts of Haryana government departments.
The Bank said it has placed four suspected officials under suspension pending investigation and filed a complaint with the police authorities, HT earlier reported, citing a regulatory filing made to the National Stock Exchange and Bombay Stock Exchange under SEBI’s Listing Regulations.
Officials said the government funds allegedly transacted illegally belonged to the development and panchayats department. “The state government has referred the matter to Haryana crime branch for investigation,” officials were quoted as saying.
“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
How were the fraudulent transactions detected?
IDFC First Bank said the financial irregularities were detected amid the procedure for closure of an account and transfer of funds to another bank on the request from a particular Haryana government department.
In the process, certain discrepancies were observed in the amount mentioned vis-à-vis the balance in the account, according to the bank.
The Bank will pursue strict disciplinary, civil and criminal action against the employees and other external individuals responsible, in accordance with applicable law.
Preliminary internal assessment indicated that the matter involved only a specific group of government-linked accounts operated through a Chandigarh branch and does not extend to other customers of the branch, the bank said.
What could be the impact?
The aggregate amount currently under reconciliation across the identified accounts is approximately ₹590 crore.
The bank said that the impact of the ₹590-crore worth of alleged financial irregularities in question may be determined based on receipt of further information, validation of claims, recoveries of any nature including those made through the process of marking lien on fraudulent beneficiary accounts maintained with other Banks, liabilities of other entities involved in the fraudulent transactions, and the legal recovery process.
The Haryana government in its February 18 instructions on dealing with banks had de-empanelled IDFC First Bank and AU Small Finance Bank for government business with immediate effect. Though no reason was ascribed for the de-empanelment of the two banks. The instructions sent to the administrative secretaries, heads of departments, deputy commissioners, managing directors by the additional chief secretary (ACS), finance said no government funds shall henceforth be parked, deposited, invested, or transacted through these two banks.
“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 Haryana Anti-Corruption Bureau (ACB) has registered a case against employees of IDFC First Bank and AU Small Finance Bank, alongside unidentified public servants, to probe suspected fraudulent transactions worth ₹590 crore involving government department accounts.
However, the AU Small Finance Bank, which was de-empaneled by Haryana government on February 18 after suspected fraudulent transactions were detected in IDFC First Bank accounts said on Monday that following a preliminary review, it has come to light that there was no indication of any financial impact or any fraudulent activity towards them.
Amount deposited back, says Haryana CM
Haryana chief minister Saini told the Vidhan Sabha in Chandigarh on Tuesday that the amount lost was deposited back into the accounts within 24 hours of the fraudulent transactions being detected.
“…I want to clarify before this House that the entire amount lost in the yesterday’s incident, including the funds of some Haryana government departments and boards and corporations, has been deposited back into our accounts within just 24 hours,” Saini said.
“Approximately ₹556 crore was deposited by the bank, of which we also received interest of approximately ₹22 crore. The interest has also been returned. We have deposited that amount and recovered all of that money within just 24 hours,” he added.
He informed that four or five middle and lower-level employees of a bank branch in Chandigarh colluded to carry out this operation, vowing strict action against those involved in it… We would form a high-level committee that would not only hold the officers and employees involved in this matter accountable but would also make suggestions to prevent future situations like the one that has arisen today…”
CM Saini had told the Vidhan Sabha in Chandigarh on Monday that the money involved in the IDFC First Bank case “will definitely come back“. He also informed the House that the matter has been handed over to the Anti-Corruption Bureau (ACB) and the vigilance department, news agency PTI reported.