- IDFC First Bank disclosed a Rs 590 crore fraud linked to a Haryana government account at Chandigarh branch
- Ashika views the incident as an operational risk, not a deterioration of the bank’s fundamentals
- Potential financial impact ranges from Rs 120 crore to Rs 590 crore depending on recovery outcomes
IDFC First Bank has found itself in a soup, after disclosing a Rs 590 crore fraud linked to a Haryana government account at its Chandigarh branch. However, brokerage firm Ashika views this incident as more of an operational risk rather than a direct deterioration of the bank's underlying fundamentals.
In a recent note, Ashika noted that the operative phrase in the bank's disclosure is 'under reconciliation' and not a 'loss'. Keeping that in mind, there is insufficient clarity to truly quantify the business impact of the fiasco.
Under a best-case assumption of an 80% recovery, the potential financial hit is expected to be around Rs 120 crore. But in a more conservative scenario involving delayed recovery or procedural complexities, the full Rs 590 crore could be charged upfront.
However, the brokerage firm notes that even in the event of a full loss, there is a manageable impact of 10-15 basis points on the bank's return on assets and 20-25 basis points on its Common Equity Tier 1 capital. Ashika added that the issue is not related to core retail asset quality, credit costs or franchise momentum.
The discrepancy took place when a Haryana government department requested to close its account or transfer funds, revealing a severe mismatch between the stated amount and the available balance. In a response, IDFC First Bank suspended four offficials and appointed KPMG to conduct an independent audit.
In the wake of the disclosure, the Haryana government de-empanelled IDFC First Bank and AU Small Finance Bank from undertaking any government business with immediate effect until further notice.
Despite all the regulatory noise, however, Ashika maintains that the bank's robust financials, including a nine-month operating profit of Rs 6,150 crore and net worth of Rs 47,000 crore as of Dec. 2025, provide a strong buffer.
ALSO READ: IDFC First Bank Appoints KPMG As External Auditor After Haryana Govt Action
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