Haryana Chief Minister Nayab Singh Saini and Reserve Bank of India Governor Sanjay Malhotra on Monday gave assurances that the funds were safe, after allegations of fraud. $A Rs 590-crore fraud involving state government accounts at IDFC First Bank has been unearthed.
CM Saini told the Vidhan Sabha in Chandigarh 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.
He further noted that IDFC First Bank had approached the Securities and Exchange Board of India (SEBI) alleging that an employee was responsible for the irregularities.
In New Delhi, Reserve Bank of India Governor Sanjay Malhotra said the central bank was “monitoring developments” surrounding the issue, but assured the public that “there is no systemic problem.” He thus explained that the fraudulent activity was limited to a specific group of accounts and did not indicate a broader failure within the national banking system.
The RBI’s statement came in the wake of the revelation made by IDFC First Bank on Sunday regarding irregularities found at its Chandigarh branch.
bout of $Question: 590 Crores
The suspected fraud was first discovered when a government department in Haryana asked to close its account at the Chandigarh branch of IDFC First Bank and transfer the balance to another institution, reports said.
As reported by Hindustan Times, the bank noticed a huge difference between the balance reported by the management and the actual funds held in the account.
Initial assessments conducted by the Bank identified a shortfall of $490 Crores. Additional internal reviews conducted by the lender identified an additional matter $100 crore in irregularities, taking the total estimated discrepancy to $590 Crores.”>Approx $590 Crores.
HT reported that a regulatory filing filed by the bank with the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) specified that these violations were limited to a select group of government-linked accounts and did not affect other branch customers.
How was the “fraud” carried out?
The mechanics of the alleged fraud were detailed by IDFC First Bank Managing Director and CEO V Vaidyanathan during a conference call with investors, PTI reported. Vaidyanathan described the incident as a case of “employee fraud” involving the collusion of bank employees and third parties. He said the fraudulent activity used physical transactions involving checks.
the The CEO noted that the bank’s “fingerprints” and internal data clearly indicate the involvement of external entities. He added that the bank’s management has not yet found any evidence of the involvement of its senior leadership.
Action and reaction so far
After the irregularities were exposed, the Haryana government reportedly took immediate administrative action. On February 18, the state Ministry of Finance issued instructions to dismantle IDFC First Bank and African Union Microfinance Bank with immediate effect. These instructions were issued by the Additional Secretary General concerned, directing all state departments, boards of directors and public sector institutions to stop all dealings with the two banks.
While the initial instructions from the finance department did not give a reason for the move, Saini maintained in the assembly that the dismantling of the forces was a direct response to the discovered scam.
IDFC First Bank has suspended four officials suspected of being involved in fraudulent transactions. The bank also filed a formal police complaint and notified the Banking Supervision Authority. To ensure an objective investigation, the Bank appoints an independent external agency to conduct a forensic audit.
The bank’s regulatory filing indicated that the discrepancies had been reported to its statutory auditors. She explained that the internal oversight committees, including the special committee of the Board of Directors to monitor and follow up on fraud cases, met on February 20, followed by meetings of the Audit Committee and the Board of Directors on February 21.
The revelation of the alleged fraud had an immediate impact on the stock market, such as IDFC First Bank shares It fell by about 20% on Monday, hitting the circuit’s lower limit of $100,000 $66.85 in mad cow disease. The African Union Microfinance Bank, which was also named in the de-institutionalization order issued by the state government, saw its shares fall 7.6% to an intraday low of $950.50.
Political demands for accountability
The issue became a point of discussion in the Haryana Assembly on Monday, with Opposition and Congress leader Bhupinder Hooda raising concerns over the security of state funds. Hooda noted that while the bank discovered the violations, the government must submit a full report on the measures taken to protect the public exchequer.
Responding to the opposition, Saini reiterated that the state government’s investigations were being conducted transparently. He confirmed that the State Crime Branch is investigating the matter along with the ACB. Saini assured the members that the government would not take this issue lightly and that any employee found involved would face strict consequences.
