For IDFC FIRST Bank, the story began not with an Enforcement Directorate raid, but with something considerably more mundane – a mismatch in the numbers.

In February 2026, a Haryana government department approached the bank to close an account and transfer its funds elsewhere, only for a discrepancy to emerge between the balance the department believed it had and the amount reflected in the bank’s records.

What followed was a review of other Haryana government-linked accounts at the same Chandigarh branch, where similar differences were found. IDFC FIRST Bank’s initial internal assessment put the amount under reconciliation at around ₹590 crore. 

That figure did not remain ₹590 crore for long. By March, the bank said it had received claims and paid a net principal amount of ₹645 crore to the relevant government entities, ₹55 crore more than its original estimate. The bank said the additional amount followed reconciliation of the claims connected to the suspected fraud.

The matter, however, was clearly nowhere near finished merely because the money had been reconciled. Investigators began tracing where the allegedly diverted funds had gone, and the case subsequently expanded into a much larger probe involving bank officials, government employees, private entities and alleged beneficiaries.

The ED’s latest action on September 29 saw searches at 14 premises across Chandigarh, Mohali and Panchkula, including premises linked to jewellers and an alleged middleman accused of helping route and layer the proceeds.

And that is where the IDFC FIRST Bank case becomes considerably more interesting than another large-number fraud story.

—Because the central question is no longer simply where did ₹645 crore go?

—It is how did such a large alleged diversion take place through accounts maintained with regulated banks, and what happened inside the banking system before the discrepancy was finally discovered?

When Government Money Enters A Private Bank

There is an important distinction here. The investigation does not, by itself, establish that IDFC FIRST Bank as an institution participated in the alleged diversion. In fact, the bank’s February disclosure said its preliminary assessment had identified unauthorised and fraudulent activities by certain employees at its Chandigarh branch, potentially involving outside individuals and entities.

Four suspected officials were suspended, the bank said, while an independent forensic audit was being initiated and a police complaint had been filed. idfcfirstbank
But that distinction does not make the banking question disappear. It makes it more important.

According to the CBI’s subsequent investigation, the alleged diversion involved funds belonging to eight Haryana government departments and public bodies, with government accounts being moved from empanelled banks into selected branches of IDFC FIRST Bank and AU Small Finance Bank.

The chargesheet alleges that public servants acted in connivance with bank officials and others, while investigators have also alleged that one senior Haryana bureaucrat influenced the opening of accounts with private banks, including IDFC FIRST Bank and AU Small Finance Bank. These remain allegations in the CBI chargesheet, not findings of guilt. 

Which brings us to the uncomfortable part of the story. A bank account is supposed to leave a trail. There are account-opening records, authorisations, transaction records, internal approvals, reconciliations and multiple layers of oversight.

Yet in this case, investigators are now reconstructing an alleged chain in which public funds were transferred, routed through various accounts and subsequently presented as legitimate business transactions, with the ED saying that some of the money was allegedly layered through jewellers.

So the real mystery surrounding IDFC FIRST Bank is not simply the size of the alleged fraud. It is the gap between the sophistication of a modern banking system and the point at which this particular alleged scheme was detected.

The Banking Trail Was Not Exactly Invisible

The investigation becomes more revealing when the alleged mechanics of the diversion are examined. The ED says the money was not simply withdrawn and carried away in one transaction. Instead, public funds were allegedly routed through a series of accounts and shell entities before moving through jewellers, where transactions were presented as purchases of gold or other legitimate business activity.

In March, the agency said the operation involved the creation of shell entities, diversion of government funds into those accounts and subsequent layering through jewellers to create an appearance of genuine transactions.

The CBI has since provided another piece of the puzzle. Its investigation into the Haryana government accounts alleges that funds were moved from empanelled banks into specific branches of IDFC FIRST Bank and AU Small Finance Bank, before being transferred to third parties unconnected with the government departments.

The agency has alleged that the money was subsequently layered through multiple accounts, converted into cash and used for the benefit of the accused. And this is where the story starts getting uncomfortable for anyone looking at the case purely as a government-funds scam. The alleged transactions were moving through bank accounts, banking records and financial instruments, not some invisible underground system.

In one case cited by the CBI, a ₹50-crore deposit by Haryana Power Generation Corporation Limited was allegedly induced by an offer of 14% interest; investigators later alleged that the offer letter was fraudulent and that a fake fixed-deposit receipt was created to make the transaction appear genuine. 

So while the investigation is focused on the people allegedly responsible for the fraud, there is another question sitting quietly inside the case: how many points in the banking process had to fail, be bypassed or allegedly manipulated before the money could travel this far?

What Did IDFC FIRST Bank Know And When?

This is also where the bank’s own account of events becomes important. IDFC FIRST Bank has said its preliminary assessment identified fraudulent activity involving certain current and former employees, with possible involvement of customers, their representatives and third parties.

The bank appointed KPMG to conduct an independent forensic review specifically to examine the alleged unauthorised and fraudulent activities, possible process-compliance failures, staff involvement, beneficiaries and the amount involved. idfcfirstbank

The bank also says that once the issue was identified, it paid ₹645.59 crore in principal, along with applicable interest, to 11 government accounts and two school accounts.

It subsequently shared February closing-balance statements with its government and institutional customers in March, over and above the bank’s standard system-generated monthly statements. According to its regulatory filing, no further claims from other entities had been received after that exercise. 

That response matters because it establishes something that can easily get lost amid the ₹645-crore headline: IDFC FIRST Bank says it compensated the affected account holders, while the criminal investigation is now focused on tracing the alleged fraud and the people who benefited from it. The bank has also said it is pursuing recovery from the perpetrators. 

But compensation does not answer the larger question. If the bank’s own forensic review was examining potential process failures, and investigators subsequently identified alleged forged instructions, shell entities, fake documentation and multiple layers of transactions, then the obvious issue is not merely whether the money was eventually restored.

It is why the alleged activity was able to continue for as long as it did before the mismatch in government account balances brought the matter into the open.

The Government Had Its Own Safeguards. So What Went Wrong?

There is another detail that makes the IDFC FIRST Bank case harder to dismiss as simply a case of a few rogue employees. After the discrepancies surfaced, the Haryana Finance Department issued an order on February 18, 2026, de-empanelling IDFC FIRST Bank and AU Small Finance Bank for government business with immediate effect.

Departments were told not to park, deposit, invest or transact government funds through the two banks and were directed to transfer balances and close the relevant accounts. 

But the same government order also revealed something rather telling about the system around these accounts. The Finance Department said several departments and corporations were not regularly reconciling their fixed deposits and bank accounts with the banks, which could lead to irregularities going undetected in time.

It consequently directed government entities to undertake monthly reconciliation and specifically verify that banks were complying with deposit instructions. S3WaaS
That changes the question slightly. The issue was not necessarily that there was no control.

There were controls on paper – government departments were expected to reconcile accounts, banks were expected to follow deposit instructions, and transactions involving public money were sitting inside formal banking systems.

The bigger question is whether those controls were actually being performed, independently checked and capable of catching manipulation before hundreds of crores were allegedly moved.

And the investigation now appears to be looking at precisely that chain. The CBI has alleged that public servants, in connivance with officials of IDFC FIRST Bank and AU Small Finance Bank, diverted funds belonging to eight Haryana government departments and public bodies into selected branches of the two banks. It has subsequently chargesheeted bank officials alongside government officials and private individuals. 

Then Came The Question Of Who Was Pulling The Strings

The latest phase of the investigation has made the case considerably wider than a banking fraud involving a handful of employees. The CBI’s third chargesheet names six Haryana-cadre IAS officers, three IDFC FIRST Bank officials, an AU Small Finance Bank official and several other government employees.

The allegations include criminal conspiracy, cheating, forgery, falsification of accounts, criminal breach of trust and corruption-related offences. These are allegations contained in the investigation and chargesheets, not convictions. 

The alleged chain also gives some indication of why the money could move beyond the original accounts. Investigators say funds were transferred to third parties with no connection to the government departments and then layered through multiple bank accounts before being converted into cash.

The ED has separately alleged that proceeds were routed through jewellers and presented as ordinary business transactions, with some of the money ultimately reaching government officials allegedly involved in the scheme. 

The September 2026 developments have therefore added another layer to the original ₹645-crore discrepancy. The ED’s latest searches covered 14 premises across Chandigarh, Mohali and Panchkula, including jewellers and an alleged intermediary involved in routing and layering the proceeds.

The agency says it has already arrested four people, filed a prosecution complaint against 14 accused and attached, seized or frozen assets worth approximately ₹211 crore.

Which leaves the IDFC FIRST Bank story sitting at an interesting intersection: government controls, private banking, alleged collusion and a money trail that investigators say travelled through multiple layers before emerging as apparently legitimate transactions.

The ₹645 crore may be the headline number, but the more revealing part of the case could ultimately be the machinery that allegedly allowed the money to move in the first place.

The ₹645 Crore Was Not The End Of The Story

There is an important reason this case should not be reduced to a headline about the government getting its money back.

IDFC FIRST Bank has said it paid ₹645.59 crore in principal, along with applicable interest, to the affected government and school accounts. From the bank’s perspective, therefore, the immediate financial exposure to its customers was addressed. But recovering the money from customers and establishing what happened to it are two very different exercises.

The latter is now the job of the investigating agencies. The ED has been following the alleged proceeds beyond the original government accounts, while the CBI’s investigation has focused on the alleged conspiracy behind the movement of the funds. The agencies’ versions of events point towards multiple layers of accounts, private entities, alleged forged documents and transactions that investigators say were designed to make diverted funds appear legitimate.

And that distinction matters because the ₹645 crore figure tells us how much money was ultimately identified and compensated for; it does not, by itself, tell us how much money was actually moved through the alleged network, how many transactions were involved or how long the scheme operated before detection.

That is where the continuing investigation becomes important. Every additional account, intermediary and transaction identified by the agencies potentially answers one part of the bigger question – not merely who allegedly took the money, but how the system around the money allowed the alleged diversion to remain undetected.

The Bigger Question Is Not Just About IDFC FIRST Bank

It would be easy to look at this as an IDFC FIRST Bank problem because that is where the discrepancy eventually surfaced. But the facts emerging from the investigation suggest a more complicated chain involving government departments, officials, multiple banks, private entities and intermediaries.

The Haryana government’s decision to de-empanel IDFC FIRST Bank and AU Small Finance Bank was itself a recognition that something had gone seriously wrong with the handling of government funds. At the same time, the government’s own order acknowledged weaknesses in reconciliation practices and directed departments to undertake monthly reconciliation of their accounts and fixed deposits.

That creates a rather uncomfortable picture.

The banking system had transaction records. Government departments had account statements. Fixed deposits had documentation. Money was moving through regulated accounts. Yet the discrepancy became visible only after a department attempted to close an account and discovered that the balance did not match what it expected.

So the most interesting question in the IDFC FIRST Bank case may ultimately have little to do with whether ₹645 crore can be recovered. It is whether the combination of bank-level controls and government-level reconciliation was robust enough to detect the alleged diversion before it reached anything close to ₹645 crore.

Because if investigators eventually establish that the alleged scheme depended on forged instructions, manipulated records, insider involvement and multiple layers of transactions, then this is not merely a story about money disappearing from government accounts.

It becomes a story about how many doors the money allegedly passed through before anyone noticed it was gone.

The Bank Says It Was A Victim Too

There is, however, another side to the IDFC FIRST Bank story that cannot be brushed aside if the article is going to examine the bank’s role fairly.

The bank’s forensic review by KPMG has concluded that the incident involved collusion between certain employees and former employees of its Chandigarh branch, employees of government customers and third parties. At the same time, the bank maintains that this was an isolated incident involving one branch, and that similar incidents were not found at its other branches. 

More importantly, IDFC FIRST Bank’s latest disclosure says the forensic review quantified the net principal amount at approximately ₹646 crore, broadly in line with the amount the bank had already paid to the affected departments. The bank says it paid the principal and applicable interest, and has classified itself as a victim of the financial fraud rather than a beneficiary of it. 

The bank has also made a point of saying that its Core Banking System records were accurate, that customers received account statements and SMS alerts for transactions, and that it has since introduced additional controls, including stronger branch-level oversight and additional authorisation requirements. idfcfirstbank
That creates an important distinction for this story.

The investigation may allege collusion involving bank personnel, but that is not the same thing as establishing that IDFC FIRST Bank itself participated in the alleged embezzlement. In fact, the bank’s position is almost the opposite: certain people allegedly used the banking system fraudulently, while the institution itself ultimately absorbed the financial loss and paid the affected government customers.

Which leaves us with a much more interesting question than simply asking whether the bank was involved. If the bank was itself a victim, how did the alleged collusion between employees, government officials and outsiders defeat the controls that were supposed to protect the bank and its customers?

And This Is Where The ₹645 Crore Case Gets Bigger

The latest ED raids suggest that investigators are no longer looking at the alleged fraud merely as a matter of forged instructions or manipulated government accounts. They are following the money after it left those accounts.

On September 29, the ED searched 14 premises across Chandigarh, Mohali and Panchkula, including jewellers and entities allegedly connected to the movement of the proceeds. The agency says the alleged public funds were routed through jewellers’ bank accounts and presented as business transactions, while Gourav Kansal has been described as an alleged middleman involved in routing and layering the proceeds. 

The CBI, meanwhile, has filed a third chargesheet naming six Haryana-cadre IAS officers and other government servants. The ED says it has already arrested four people, filed a prosecution complaint against 14 accused and attached, seized or frozen assets worth approximately ₹211 crore. 

So the case has now moved well beyond the original discovery of a mismatch in government account balances. There is an alleged chain running from government accounts to bank branches, from bank accounts to third parties, from there to jewellers and other entities, and ultimately, investigators allege, towards officials and other beneficiaries.

And that is perhaps the most revealing way to look at the IDFC FIRST Bank case. The ₹645 crore is the number that gets attention. The banking trail is the story.