IDFC First Bank’s share price crashed as much as 20% in morning trade on Monday, February 23, after the bank said it uncovered fraudulent transactions worth around ₹590 crore at one of its branches in Chandigarh. IDFC First Bank shares opened at ₹75.21 against their previous close of ₹83.56 and crashed 20% to an intraday low of ₹66.85.
IDFC First Bank reported a ₹590 crore fraud at its Chandigarh branch with respect to deposits from Haryana Government entities, which raised concerns over the potential earnings impact.
As Mint reported, the bank has informed the RBI, filed a complaint with the police and is also in the process of filing further complaints with appropriate law enforcement agencies and reporting to relevant authorities.
The potential impact of fraud on IDFC First Bank
As per reports, the Haryana Government has de-empanelled IDFC First Bank and AU Small Finance Bank (not rating) from parking of bank deposits.
According to global brokerage firm Macquarie, for IDFC First and AU Small Finance Bank, Haryana Government deposits form close to 0.4-0.5% of overall deposits. All state and central government deposits combined are roughly 8-10% of overall deposits for IDFC First Bank.
Macquarie highlighted that while IDFC First Bank’s management believes this is an isolated issue, there will be greater scrutiny of government deposits in private sector banks, and some deposits could move to PSU banks over the medium term.
This will affect CASA. CASA ratios post COVID have been under pressure across the system, having declined 500-600bps from the peak levels, Macquarie noted.
Analysts believe IDFC First may see a potential outflow of about ₹20 billion due to the Haryana Government’s decision to stop transactions through IDFC and AU Small Finance Bank.
According to Rikin Shah, an equity research analyst at IIFL, IDFC First Bank has deposits of ₹198 billion (6.8% of total deposits) in Haryana. The fraud amounted to ₹5.9 billion, which is 3% of deposits in Haryana.
Assuming 10% of deposits in Haryana are from the government accounts, it would lead to a potential outflow of ₹20 billion- 0.7% of total deposits. This would also hurt the agency commission – the amount the RBI pays to the banks for conducting government business, said Shah.
According to Shah, potential beneficiaries from these deposit outflows at IDFC and AU SFB could be PNB and other PSU banks like SBI, Canara, Union and private banks like HDFC Bank, ICICI Bank, and Axis Bank.
IDFC First Bank shares: Should investors buy, sell, or hold?
At this juncture, concerns are high that the bank’s reported fraud will impact its earnings.
Experts highlight that while the bank’s management has assured that the issue is confined to specific accounts and recovery efforts are underway, the sheer scale of the fraud is alarming.
“IDFC First Bank’s disclosure of a ₹590 crore fraud at its Chandigarh branch has cast a long shadow over its earnings and future prospects. It is nearly equivalent to six months of the bank’s net profit, raising concerns about earnings sustainability,” Seema Srivastava, Senior Research Analyst at SMC Global Securities, observed.
Srivastava underscored that the bank’s Q3FY26 results showed stable revenue growth but muted profitability, with net profit largely flat compared to the previous year. This was already a point of concern for investors, as margins remain under pressure from rising costs and provisioning requirements.
The fraud disclosure now compounds these worries, as potential write-offs, legal costs, and reputational damage could further erode profitability in FY26–27, said Srivastava.
More importantly, the incident highlights weaknesses in internal controls and governance, which could attract regulatory scrutiny and undermine institutional trust, Srivastava added.
Srivastava says from an investor perspective, the immediate action should be caution.
“The sharp fall in share price reflects heightened risk perception, and while valuations may appear attractive after the correction, the uncertainty around recovery of funds and reputational impact makes fresh exposure risky. The fraud has materially dented sentiment, and investors would be better served by adopting a wait-and-watch approach rather than averaging down prematurely,” said Srivastava.
“Long-term holders should closely monitor updates on forensic audit findings, recovery progress, and regulatory actions before reassessing their position. Unless management demonstrates swift corrective measures and improved governance frameworks, the bank’s ability to deliver sustainable growth and maintain investor confidence remains questionable,” Srivastava added.
Technical experts say that the stock has broken below its crucial support zone of ₹77–78 with strong volume. This signals a shift in trend from bullish to bearish.
Drumil Vithlani, a technical analyst at Bonanza, pointed out that the stock is now trading below all major exponential moving averages — 20, 50, 100, and 200 EMAs — confirming both short-term and long-term weakness.
Vithlani added that the RSI stands at 23.83, significantly below its 14-period average of 48.59, indicating oversold conditions following heavy selling pressure.
“Immediate support is placed near the recent low around ₹66–67, a level that has been tested multiple times previously. Resistance is now seen at ₹77, which will act as a key hurdle for any recovery,” said Vithlani.
Sachin Gupta, VP–Research at Choice Broking, highlighted that IDFC First Bank saw a serious structural breakdown, slicing through its 50-day and 100-day SMAs with heavy sell-side volume, a clear sign of panic distribution rather than normal profit booking. Now, all eyes are on the 200-day SMA, placed near ₹77.
Gupta said this is the last major long-term support. A decisive close below this level would shift the broader trend from a buy-on-dips structure to a sell-on-rise strategy.
While the 14-day RSI is rapidly entering oversold territory — which typically signals exhaustion — the current price action suggests caution. Oversold conditions in event-driven selloffs often turn into value traps unless stability returns, Gupta said.
According to Gupta, the earlier support zone of ₹81– ₹83 has now flipped into a strong supply area. Any bounce towards this range is likely to face selling pressure unless backed by positive developments.
“For now, the stock remains in a wait-and-watch phase. Clarity from the forensic audit and sustained price stability above the psychological ₹80 mark will be key before considering any constructive view,” said Gupta.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
