MUMBAI: Shares of IDFC First Bank and AU Small Finance Bank crashed 20% and 10% respectively on Monday, after the Haryana government removed them from its empanelled list. The action came after IDFC First Bank admitted that it had found a Rs 590-crore fraud by its employees, while AU Small Finance Bank disclosed a suspected Rs 47-crore fraudulent transaction in a government account.
The de-empanelment has had a significant impact on AU Small Finance Bank’s government deposits. As of February 17, 2026, the bank held around Rs 735 crore in deposits from Haryana government departments. After the de-empanelment, this amount fell to around Rs 538 crore as of February 21, 2026.
AU Bank said it has started an internal review after the government sought clarification regarding suspicious transactions related to one specific account of the finance department and a customer account. IDFC First Bank said on Sunday that a preliminary internal review found the matter was limited to a specific group of Haryana government-linked accounts handled through a branch in Chandigarh.
In early trade, IDFC First Bank shares fell as much as 20% to Rs 66.85 on the BSE and were trading 17% lower at Rs 70 at 11:30 am. AU Small Finance Bank shares opened sharply lower at Rs 950, down 10%, and were trading 7% lower at Rs 960. In contrast, Bank Nifty, Nifty and Sensex were trading in the green.
IDFC First Bank said it has informed the banking regulator and filed a police complaint. Brokerage estimates said the amount under reconciliation is about 0.9% of the bank’s net worth and nearly 20% of its fiscal 2026 pre-tax profit.
"Prima facie, unauthorised and fraudulent activities have been carried out by certain employees at a particular branch in Chandigarh in a specific set of Haryana government accounts and potentially involving other individuals/entities/counterparties," said the IDFC Bank filing.
The bank currently estimates the fraud at Rs 590 crore and said the final amount will be determined after reconciliation based on further information, validation of claims and recoveries.
Explaining the reason for the de-empanelment, AU Bank said that on February 16 it received a communication from a Haryana government department seeking account-opening and transaction details of one specific account, and it submitted all related information. On February 18, it received another communication seeking details about suspected unauthorised transactions between the government account and another customer account. Later the same day, the finance department informed the bank about its de-empanelment for government business in the state.
The bank said its internal review confirmed that the government and customer accounts were both “duly opened after completion of all applicable KYC checks and requisite authorizations and in accordance with the Bank’s internal policies and processes”.
“Based on available facts at this stage and preliminary review, there is no indication of any financial impact or any fraudulent activity towards the Bank,” it said, without disclosing transaction details. However, according to analysts’ estimates, the suspected fraudulent transaction is around Rs 47 crore.
A Haryana circular issued on Sunday said both banks have been de-empanelled for government business with immediate effect and until further orders. As a result, no government funds will be parked, deposited, invested or transacted through these banks.
"IDFC First Bank and AU Small Finance Bank are hereby de-empanelled for government business in Haryana with immediate effect till further orders," the circular from the finance department said.
The fraud was discovered after the finance department, which had been banking with IDFC First Bank for a long time, decided to close the account and transfer the balance to another bank.
"In the process, certain discrepancies were observed in the amount mentioned vis-a-vis the balance in the account," it said, adding that similar issues were found in other Haryana government accounts that engaged with the bank from February 18 onwards.
Four officials of IDFC First Bank have been suspended pending investigation. As part of recovery efforts, the bank has sent a "recall request" to certain beneficiary banks to "lien mark balance" in suspicious accounts, according to the exchange filing.
The bank has informed its statutory auditors and will conduct an independent forensic audit through an external agency.