The market opens
Published 3 October 2026
Markets do not read FIRs. They read filings, and the filing on a Sunday night was enough.
The fall
IDFC First Bank's shares opened to a stampede. They fell as much as 20 per cent in a single session, wiping out roughly Rs 14,438 crore in market capitalisation at the low, per ET. They pared losses to close at Rs 70.04, down 16 per cent, the steepest decline since the Covid period, according to Business Standard, which put the closing erosion at more than Rs 11,000 crore. The two numbers describe the same day measured at different moments.
The reason a fraud of Rs 590 crore could move a bank this much is the denominator. The bank's net profit for the October-December quarter had been Rs 503 crore, up 48 per cent, per ETV Bharat. The suspected fraud was therefore larger than a full quarter's earnings. The brokerages put it in numbers: UBS pegged the hit at roughly 22 per cent of FY26 profit after tax with about a 1 per cent effect on net worth, and Morgan Stanley estimated about a 20 per cent hit to FY26 profit before tax, per ET.
The regulator's one sentence
Reserve Bank of India Governor Sanjay Malhotra spoke after the central board's meeting in New Delhi, alongside Finance Minister Nirmala Sitharaman's customary post-Budget address. His line, per ETV Bharat and Business Standard, was: "We are watching the development, there is no systemic issue." He had added, as a policy statement, that the RBI does not comment on individual banks or regulated entities. The relevant words are the second ones. A regulator that says "no systemic issue" about a private bank on the day a fraud is disclosed is making a claim about contagion, not about the bank.
The chief executive's call
V Vaidyanathan held an analyst call before the market opened. He called the incident isolated, said the cause was collusion between employees and external parties, and said the bank had controls, including maker, checker and authoriser, which had failed in this instance due to collusion. Haryana government deposits, he said, form about 0.5 per cent of the bank's total deposits of Rs 2.82 trillion, and since the incident about Rs 200 crore had flowed out of them. State and central government balances together make up 8 to 10 per cent of the deposit base. He said the bank would make explicit customer confirmation mandatory for high-value branch transactions above a predefined threshold, and that employee dishonesty insurance cover of Rs 35 crore and recoveries could reduce the impact. "We will spare no one," he said.
The statements on the call are the bank's. Each can be checked against later documents, and some have been. "One branch, one client group" matches the KPMG finding in June that the fraud was limited to the Chandigarh branch. "No system-level issue" matches what the bank said about its core banking records. The line about the number not moving did not hold: the figure the bank later cited was Rs 646 crore in net principal.
What the bank promised the state
On the same Monday the bank told the Haryana government it would pay the unreconciled Rs 590 crore as soon as possible, after a meeting between its top management and senior state officials, per Business Standard. The bank engaged KPMG, whose review it expected in four to five weeks. The line from the bank that matters for the next chapter is the one about Haryana's money: the bank said it would own up to it, including making the payment.
The day the government of Haryana got its money
The next day, Chief Minister Nayab Singh Saini told the Haryana Vidhan Sabha that "approximately Rs 556 crore was deposited by the bank, of which we also received interest of approximately Rs 22 crore", and that the entire amount lost had been returned to the government's accounts within 24 hours. The interest, he said, had also been returned. He said four or five middle and lower-level employees of a Chandigarh branch had colluded, and that a high-level committee would be formed. By April, the bank would say in a regulatory filing that it had paid out 100 per cent of principal and interest to the relevant departments of the Haryana government.
So, within two days of the public announcement, the state was whole on paper, the bank had taken the loss, and the question of who had taken the money was just starting. It was Tuesday, 24 February, and the arrests were about to begin.
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