A $A Rs 590-crore scam related to accounts of Haryana government departments at IDFC First Bank has made headlines, forcing Chief Minister Nayab Singh Saini to issue a statement amid concerns over whether the funds are safe or not.
The amount deposited with IDFC First Bank was recovered, including interest, within 24 hours of the fraud coming to light, Haryana Chief Minister Nayab Singh Saini said on Tuesday.
On Monday, Prime Minister and Reserve Bank of India (RBI) Governor Sanjay Malhotra gave assurances that the funds are safe, following the alleged charge. $A Rs 590-crore fraud involving state government accounts at IDFC First Bank has been unearthed.
What is the alleged IDFC fraud?
Private sector lender IDFC First Bank revealed for the first time the discovery of the suspected fraudulent transactions on Saturday, saying these transactions amounted to $590 crore in one of its branches in Chandigarh and included accounts of Haryana government departments.
The bank said it has placed four suspected officials under investigation and lodged a complaint with police authorities, HT reported earlier, citing a regulatory filing submitted to the National Stock Exchange and the Bombay Stock Exchange under SEBI’s listing regulations.
The government funds allegedly circulated illegally belong to the development department and the panchayat, officials said. “The state government has referred the matter to the Haryana Crime Branch for investigation,” officials were quoted as saying.
“The bank is in the process of appointing an independent external agency to conduct an independent forensic audit. The statutory auditors have been informed. A meeting of the Special Committee of the Board of Directors for Monitoring and Follow-up of Fraud Cases (SCBMF) was held on February 20. The meeting of the Audit Committee and the Board of Directors was held on February 21,” the bank said in its regulatory filing.
How are fraudulent transactions detected?
IDFC First Bank said that the financial irregularities were detected amid the procedures of closing the account and transferring the funds to another bank at the request of a certain government department in Haryana.
In this process, some discrepancies were noted in the amount mentioned versus the balance in the account, according to the bank.
The Bank will take aggressive disciplinary, civil and criminal action against employees and other responsible external individuals, in accordance with applicable law.
The bank said that an initial internal assessment indicated that the issue relates only to a select group of government-linked accounts operated through the Chandigarh branch and does not extend to other clients of the branch.
What could the effect be?
The total amount currently being settled across the selected accounts is approx $590 Crores.
The bank said that the impact $Rs 590 crore worth of alleged financial irregularities in question may be identified based on receipt of additional information, verification of claims, recoveries of any kind including those made through lien determination process on fraudulent beneficiary accounts maintained with other banks, liabilities of other entities involved in the fraudulent transactions, and statutory recovery process.
The Haryana government, in its February 18 directions on dealing with banks, dismantled IDFC First Bank and African Microfinance Bank for government business with immediate effect. Although no reason has been identified for the break-up of the two banks. The instructions sent to the Administrative Secretaries, Heads of Departments, Deputy Commissioners and Administrative Directors by the Additional Chief Secretary (ACS), Finance stated that henceforth no government funds will be parked, deposited, invested or dealt with through these two banks.
The instructions said: “All concerned departments and organizations must take immediate measures to transfer balances and close accounts with the banks mentioned above.”
The Haryana Anti-Corruption Bureau (ACB) has registered a case against employees of IDFC First Bank and African Microfinance Bank, along with unidentified government employees, to investigate suspected fraudulent transactions worth $Rs 590 crore relates to accounts of government departments.
However, the African Union Microfinance Bank, which was dismantled by the Haryana government on February 18 after discovering suspected fraudulent transactions in IDFC First Bank accounts, on Monday said that after an initial review, it was found that there was no indication of any financial influence or any fraudulent activity towards them.
Amount deposited back, says Haryana CM
The missing amount was credited back into the accounts within 24 hours of the fraudulent transactions being detected, Haryana Chief Minister Saini told the Vidhan Sabha in Chandigarh on Tuesday.
“…I want to make it clear before this House that the entire amount lost in yesterday’s incident, including funds of some departments, boards and companies of the Haryana government, has been credited back into our accounts within just 24 hours,” Saini said.
“almost $An amount of Rs 556 crore has been deposited by the bank, from which we have also received approx interest $22 Crores. Interest was also returned. We made that deposit and got all that money back in just 24 hours.”
He informed that four or five middle and lower level employees of one of the bank’s branches in Chandigarh colluded to carry out this operation, and pledged to take strict action against those involved in it… We will form a high-level committee that will not only hold accountable the officials and employees involved in this matter but will also make suggestions to prevent future situations like the one that has arisen today…”
CM Saini had told the Vidhan Sabha in Chandigarh on Monday that the money involved in the IDFC First Bank case “will definitely come back”. He also informed the House that the matter has been handed over to the Anti-Corruption Bureau (ACB) and Vigilance Department, news agency PTI reported.
