The Haryana government dropped a bombshell on the banking sector Tuesday, blacklisting IDFC First Bank and AU Small Finance Bank amid a staggering Rs 590 crore fraud scandal. Effective immediately, the duo is barred from all state government business.
A stern government order mandates every department, board, corporation, and public sector unit to cease transactions with these banks forthwith. Instructions are clear: withdraw all funds, shift them to compliant banks, and shut down the accounts without delay.
At the heart of the controversy are violations in fixed deposit protocols. The finance ministry revealed that monies designated for lucrative FD options or flexi plans were diverted to ordinary savings accounts, slashing interest income and inflicting heavy financial damage on Haryana.
Moving forward, rigorous oversight is non-negotiable. Departments must enforce deposit conditions to the letter, audit bank compliance routinely, reconcile accounts monthly, and flag issues on the spot. Full reconciliation is targeted for March 31, 2026, followed by compliance certification by April 4.
It all unraveled with IDFC First Bank’s admission in regulatory filings of fraudulent dealings in Haryana-related accounts via its Chandigarh outpost. Initial findings implicate branch employees in shady operations, with potential outside accomplices.
Trigger: A routine account closure request by a state department uncovered glaring balance shortfalls. By February 18, anomalies rippled across multiple accounts.
The bank insists the breach is isolated to those specific government accounts, sparing other clients. Total disputed sum: Rs 590 crore, to be finalized after probes and recoveries.
Suspensions hit four officials as investigations continue. Disciplinary measures, lawsuits, and criminal charges loom for the guilty. Banks are pursuing liens on frozen funds, alerting auditors, and hiring external forensic experts for a deep dive.