On February 18, 2026, irregularities were discovered in some accounts belonging to the Haryana state government at IDFC First Bank's Chandigarh branch. According to reports from ET Now, the actual account balances did not match the amounts claimed by account holders. The fraud is estimated to be approximately ₹590 crore, more than the bank's entire quarterly profit. The bank has suspended four suspected officials, filed a police complaint, and appointed KPMG to conduct a forensic audit. The Haryana Government has de-empanelled IDFC First Bank for all government business with immediate effect, directing all departments to transfer balances and close accounts by 31st March, 2026.
According to Motilal Oswal Research as reported by ET Now, mutual funds have invested a total of ₹6,990 crore in IDFC First Bank, representing a 5.1% increase from January month-on-month. They hold 83.57 crore shares, which is a 7.7% increase from January month-on-month. HSBC Mutual Fund and Motilal Oswal Mutual Fund are the top holders, each with 8.53 crore shares. Edelweiss Mutual Fund holds 6.05 crore shares, while Kotak Mutual Fund has 3.69 crore shares. Aditya Birla Sun Life Mutual Fund holds 3.52 crore shares, and Parag Parikh Mutual Fund holds 1.05 crore shares. JioBlackRock Mutual Fund has also invested 5.80 lakh shares in the bank.
The Haryana Government has de-empanelled IDFC First Bank for all government business with immediate effect. As per the Finance Department's directive, no government funds shall be parked, deposited, invested, or transacted through these banks. All departments, boards, corporations, and public sector units have been directed to transfer the balances and close the accounts maintained with the bank without any delay, and to ensure strict compliance with the department's banking and reconciliation guidelines by 31st March, 2026. The government observed that certain banks are not adhering to the conditions under which fixed deposits are being made by the Departments and Corporations.
IDFC First Bank shares have sharply underperformed the Nifty Bank index across most timeframes. According to ET Now, the bank's shares fell 15.98% over the past week, compared with a 0.23% gain on the Nifty Bank. The stock declined 15.62% in the past month while the index rose 4.86%. Year-to-date, the stock is down 18.20% against the Nifty Bank's 2.69% rise. Even over longer periods, the underperformance persists, with IDFC First Bank returning 16.91% over one year, 28.97% over three years, and 9.76% over five years, significantly lagging the Nifty Bank's returns of 26.03%, 53.64%, and 68.21% respectively.
While the IDFC First Bank fraud has raised concerns, mutual fund investors don't need to track every development like direct stock investors. According to ET Now, monitoring stock-specific risk is the fund manager's responsibility. However, investors should monitor the fund's overall performance compared to its benchmark and peer funds, monthly portfolio disclosures to see whether the fund manager is reducing, maintaining, or increasing exposure to the bank, and any commentary from the fund house explaining its stance on IDFC First Bank. Investors should also monitor the level of concentration in the portfolio, especially in focused or financial sector funds where exposure to a single stock may be high. The fraud of ₹590 crore at a single Chandigarh branch involving Haryana government accounts represents only 0.5% of total deposits, with overall government deposits forming 8-10% of the bank's total deposits.
