India’s IDFC First Bank tanks 20% on suspected $65m fraud

Shares of India’s IDFC First Bank, backed by the Abu Dhabi Investment Authority (Adia), slumped as much as 20 percent on Monday after the private lender disclosed suspected fraud amounting to 5.9 billion rupees ($65 million) over the weekend.

The stock fell 16.13 percent to close at 70.04 rupees, a nearly five-month low, and led losses among banks.

IDFC First Bank raised up to 75 billion rupees ($877 million) from affiliate companies of private equity group Warburg Pincus and Adia in April 2025.

The bank has a loan book of 2.79 trillion rupees ($30.8 billion) and deposits of 2.82 trillion rupees.

The private lender reported that the suspected fraudulent transactions were limited to government-linked accounts at a branch in Chandigarh city, where discrepancies surfaced after entities related to the northern state of Haryana sought to close accounts and the balances did not match records.

The issue came to light a month ago and the banking regulator, the Reserve Bank of India, is aware of the matter, IDFC First’s management said in a conference call on Monday.

The RBI is watching developments at IDFC First Bank, governor Sanjay Malhotra said at a press conference following the central bank’s board meeting. “There is no systemic issue with the bank,” he said.

The bank has suspended four employees and appointed KPMG to conduct an independent forensic audit.

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UBS estimates the suspected fraud amount at about 22 percent of IDFC First’s fiscal year 2026 profit after tax, though it expects the capital impact to be limited to around 1 percent of the net worth. Morgan Stanley pegs the potential hit to profit before tax at roughly 20 percent.

Jefferies said the lender would need to reassure investors that the issue had not spread to other clients, and added that the matter did not appear to be systemic.

IDFC First Bank has said it could make recoveries, including from accounts at other banks.

The bank has insurance against employee dishonesty and can potentially recover 350 million rupees through that, the management said on the analyst call, according to a Jefferies note.