- IDFC First Bank to recover Rs 35 crore from employee dishonesty insurance policy
- Rs 590 crore fraud discovered at the Chandigarh branch involving forged physical cheques
- Four officials suspended; KPMG appointed for a forensic audit
IDFC First Bank is set to recover about Rs 35 crore under its employee dishonesty insurance policy following the discovery of a Rs 590 crore fraud at its Chandigarh branch, offering limited financial relief as the lender works through the fallout.
Management told investors that the bank holds an employee dishonesty cover of Rs 35 crore at the institutional level.
To that extent, the eventual financial impact will be mitigated, subject to admission and payout of the claim. Any remaining loss beyond the insured amount will be absorbed by the bank. The policy is designed to cover losses arising from fraudulent or dishonest acts committed by employees.
Probe Underway; Officials Suspended
The bank has suspended four officials in connection with the incident and has filed complaints with law enforcement authorities. It has also informed regulators and statutory auditors about the matter.
A forensic audit has been commissioned, with KPMG appointed to conduct an independent investigation. The probe is expected to conclude within four to five weeks.
ALSO READ: IDFC First Share Plunge Due To Fraud Case, Not De-Empanelment, Says Bank
Managing Director and Chief Executive V. Vaidyanathan said the bank will create provisions in line with its policy of early recognition of stress. He added that the issue was confined to a single branch and a specific client group, and involved forged physical cheques.
Vaidyanathan described the event as a physical, non-digital breach involving forged checks and manual debit instructions. "This is, let me say, the oldest kind of fraud probably known to banking," Vaidyanathan said. "How this has happened is obviously due to the connivance of employees."
The bank initially identified a Rs 490 crore discrepancy following a government request to transfer funds, later uncovering an additional estimated Rs 100 crore through internal scans. Despite the scale, management emphasised the bank's financial resilience.
The scale of the fraud - which exceeds the bank's reported quarterly profit of Rs 503 crore - unsettled investors. Shares of the lender fell 16.18% to close at Rs 70.04 on the BSE. The decline came even as the benchmark BSE Sensex rose 0.58% during the session, highlighting stock-specific concerns.
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