Haryana’s State Vigilance and Anti-Corruption Bureau has arrested four people, including the mastermind behind the Rs 590 crore fraud involving IDFC First Bank, officials said on Wednesday. The Anti-Corruption Bureau (ACB) director general A S Chawla said that two of the accused were former IDFC First Bank employees, while the other two run a partnership firm. The arrested have been identified as Ribhav Rishi, Abhay Kumar, Swati Singla, and Abhishek Singla. Rishi headed the bank’s Sector 32 branch until six months ago, and Abhay, the bank’s relationship manager who quit in August last year, allegedly masterminded the fraud. Rs 300 crore was transferred to the Swastik Desh Project’s account, Chawla said. Swati Singla, who owns 75 per cent of the firm, and her brother Abhishek, who holds 25 per cent, were also arrested. “Swati Singla is Abhay’s wife. We have arrested all four,” he added.What happened?The issue came to light on Sunday, when the bank revealed that a Rs 590-crore fraud had been detected involving its employees and others in accounts linked to the Haryana government. The Anti-Corruption Bureau had earlier registered an FIR in the matter, while the Haryana government set up a committee to examine the suspected fraud. What the bank saidOn Tuesday, bank paid back 100% of the principal and interest to the concerned Haryana government departments, amounting to a net Rs 583 crore. The lender said that employees at its Chandigarh branch carried out unauthorised transactions in accounts connected to the Haryana government, leading to a deposit mismatch of around Rs 590 crore, an amount higher than the bank’s third-quarter net profit of Rs 503 crore.An initial internal review suggested the irregularities were limited to a specific set of Haryana government-related accounts at the branch. The bank then lodged a police complaint, informed its statutory auditors and appointed KPMG to conduct an independent forensic investigation.Managing Director and CEO V Vaidyanathan said that the lapse was limited and linked it to internal collusion rather than any wider structural problem.“The bank has necessary controls in place, including maker, checker and authoriser for clearing cheques or debit instructions from the department,” Vaidyanathan told ET. “We have been in operation for over 10 years and have rolled out over 1,000 branches and have had no such incident before.”He added, “Prima facie third-party entities are involved in this compromise… The issue is specific to one branch and one client group and is thus an isolated instance. There is no system-level issue.”Sharp market reactionThe development wiped out more than Rs 14,000 crore in investor wealth. On Monday, shares of IDFC First Bank hit the lower circuit after the alleged misappropriation was found to be larger than the bank’s quarterly earnings.The stock had touched a 52-week high of Rs 87 in the first week of January and remained near that level in the following weeks. However, sentiment weakened on Monday when the share price fell to Rs 70 from the previous close, putting it nearly 20% below its 52-week peak. On Wednesday, the stock continued to trade in the red, down 0.54 points or 0.46% at Rs 70.43.Oversight measures and state responseThe Board’s Special Committee for Monitoring Fraud Cases met on February 20, followed by meetings of the full Audit Committee and the Board on February 21.In an early morning regulatory filing, the bank said it had informed the banking regulator and filed a police complaint. It has also issued recall notices to beneficiary banks, seeking lien marking of funds in accounts flagged as suspicious to help limit the financial impact.The fallout has also reached the state government level. The Haryana government has removed IDFC First Bank from its empanelled list along with AU Small Finance Bank and directed state departments to close their accounts with both banks.
