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Haryana Halts Transactions with IDFC First Bank After $71M Fraud

  //business-finance.news-articles.net/content/202 .. ctions-with-idfc-first-bank-after-71m-fraud.html
  Published in Business and Finance on Monday, February 23rd 2026 at 0:43 GMT by moneycontrol.com
      Locales: Haryana, Maharashtra, INDIA

Chandigarh, Haryana - February 23rd, 2026 - The Haryana state government has taken decisive action, halting all financial transactions with IDFC First Bank following the revelation of a significant INR590 crore (approximately $71.25 million USD) fraud. The fraud, discovered through an internal investigation by the bank itself, involves the alleged creation of fake invoices and the illicit routing of funds through a network of shell companies.

The state's treasury department swiftly issued a circular to all government departments earlier today, directing an immediate cessation of all dealings with IDFC First Bank until further notice. This includes the suspension of direct deposits, payments, and any other financial interactions. The move underscores the gravity of the situation and the government's commitment to safeguarding public funds.

Details of the Fraud Emerge

Initial investigations suggest the fraudulent activity spanned several months, with perpetrators allegedly exploiting vulnerabilities in the payment processing system to generate false invoices. These invoices were then reportedly channeled through shell companies - entities with no genuine business operations - to disguise the source and destination of the funds. The scale of the fraud is considerable, making it one of the largest instances of financial misconduct involving a public-private banking relationship in recent Haryana history.

IDFC First Bank proactively brought the issue to the attention of the Haryana government, outlining the findings of its internal review and assuring authorities of its commitment to rectifying the situation and implementing preventative measures. While the bank has expressed cooperation, the government remains cautious, prioritizing a thorough investigation to determine the full extent of the fraud and identify all individuals involved.

Government Response & Independent Inquiry

The Haryana government has launched its own independent inquiry, parallel to the bank's internal investigation, to corroborate the findings and assess the potential for internal collusion. The inquiry team will focus on scrutinizing transaction records, identifying loopholes in existing financial controls, and determining whether any government employees were complicit in the fraudulent scheme. Sources within the government suggest that the irregularities were initially flagged during routine audits of government payment processing.

"We are treating this matter with the utmost seriousness," stated a senior government official. "The state government's primary responsibility is to ensure the safety and security of public funds. While we acknowledge IDFC First Bank's cooperation, a thorough and independent investigation is essential to establish accountability and prevent future occurrences."

Ripple Effects & Banking Sector Implications

The suspension of dealings with IDFC First Bank is expected to cause temporary disruption to government financial operations. The government is actively reviewing its existing banking relationships and exploring partnerships with alternative financial institutions to ensure uninterrupted services. This process is expected to take several weeks, and officials have assured citizens that all legitimate government payments will continue to be processed, albeit potentially through different channels.

The incident has also raised broader concerns within the banking sector regarding the vulnerability of payment systems to fraudulent activities. Financial analysts are anticipating increased scrutiny of internal controls and risk management practices at other banks, particularly those handling significant government funds. Experts suggest that the incident will likely accelerate the adoption of more robust fraud detection technologies and stricter due diligence procedures across the industry.

The possibility of similar fraudulent activities occurring at other branches of IDFC First Bank, or even at other financial institutions, is also under investigation. Regulators are expected to launch a comprehensive review of banking practices to identify and address systemic weaknesses that could be exploited by fraudsters.

Future Outlook

The Haryana government has not indicated a timeframe for reinstating financial dealings with IDFC First Bank, stating that the decision will be contingent upon the outcome of the ongoing investigations and the implementation of adequate safeguards to prevent future fraud. The severity of the financial loss and the potential for internal collusion are likely to necessitate a significant overhaul of the bank's internal controls and risk management framework before the government considers resuming its relationship. The incident serves as a stark reminder of the importance of robust financial oversight and the need for constant vigilance in protecting public resources.