IDFC First Bank runs full-page print ad after Rs 590-crore fraud

In what appears to be a damage control exercise following the recent report of a Rs 590-crore fraud, IDFC First Bank issued a full-page ad in the Wednesday edition of The Times of India nationwide. 

The print ad, which appeared in the form of a letter of disclosure to National Stock Exchange of India Limited and BSE Ltd, explained that the authorities at the "principle-first" bank have taken all appropriate measures in response to the fraud.

In mid-February, IDFC First Bank publicly announced the details of the fraud. it alleged that some of the bank’s junior and mid-level employees had used cheque forgery and unauthorised transactions to syphon funds from the Haryana government’s account with the bank. A total of approximately Rs 590 crore was transferred to other private banks via multiple cheques over time. 

The fraud reportedly came to light when the Haryana government was trying to close its account with the bank and found massive discrepancies between its records and the balance shown by the bank. 

Initial investigations by the police and KPMG, a financial advisory firm, suggest that four to five bank employees collaborated with external individuals to transfer the stolen funds to a private partnership firm named Swastik Desh Projects. This firm is operated by relatives of one of the accused, according to the Haryana State Vigilance and Anti-Corruption Bureau.

Since the total discrepancy was pegged at around Rs 590 crore, which is higher than the bank’s total net profit of Rs 530 crore in the previous quarter, customer confidence in the 10-year-old bank started to plummet after the news broke, leading to the erosion of over Rs 14,000 crore in its share price. 

The ad was a reputation management move aimed at containing the impact. However, the bank was also obligated to disclose the fraud to its investors as per Regulation 30 set by the Securities and Exchange Board of India (SEBI). The regulation forces publicly traded companies to immediately declare anything "material” that could impact the company's stock price.

The ad read: “Now was the occasion to stand up and deliver when it truly matters and put our CUSTOMER FIRST principles in action. We are a principle-based bank, and we mean it. We did not hold up the payment on account of the matter being under investigation. This is the DNA of IDFC FIRST Bank."

"Even though the investigation in the matter is ongoing, we have paid out 100% of the principal and interest to the relevant departments of the Haryana government, as claimed, which works out to a net amount of Rs 583 crore," it added.

"The departments have sincerely thanked and appreciated the bank for the positive approach, professional manner, and speedy and principle-based resolution.”

Haryana's chief minister Nayab Saini has said that the culprits responsible for the fraud have been arrested, and the entire amount was recovered within 24 hours of the revelation.