MUMBAI: IDFC First Bank on Saturday said the impact of the ₹590 crore fraud uncovered in February is now behind it, with the episode having no effect on new business during the March quarter (Q4FY26).
Speaking during the bank’s Q4FY26 post-earnings analyst call, managing director and chief executive officer V. Vaidyanathan said similar crises at other banks typically take about a year to stabilize, but that has not been the case here.
“We are quite confident that this matter is behind us. Q1FY27 itself, you will see a strong growth in the bank,” he said, adding that despite the fraud and the geo-political stress, the bank posted flattish growth in deposits, which is “good news for the quarter that went by”, especially as it cut rates on savings deposits.
“When the news broke out in Feb(ruary) and all of March, the news was hot. The number of accounts opened was as high as the previous month of February, which was equal to January. So new account opening is coming along perfectly strong,” Vaidyanathan said.
In Q4, total deposits of the bank grew 17% on year and 1% on quarter to ₹2.9 trillion, however low cost current account and savings account (Casa) deposits fell 2.5% on quarter. The share of Casa deposits stood at 49.8% as at the end of March, higher than 46.9% a year ago but lower than 51.6% in the previous quarter.
Vaidyanathan said he expects deposits to grow around 5% sequentially going forward.
IDFC First Bank reported a net profit of ₹319 crore for the quarter, up 4.9% year-on-year but down 36.5% sequentially, reflecting a one-time post-tax impact of ₹483 crore related to the fraud. A trading loss of ₹118 crore during the quarter also weighed on profitability.
The lender had on 23 February disclosed a ₹590 crore fraud at its Chandigarh branch, where employees carried out unauthorized transactions in accounts linked to the Haryana government, creating a deposit balance discrepancy. The bank has since paid the state government ₹590 crore, suspended the employees involved and filed police complaints against them.
On Saturday, the bank said it has fully expensed the impacted amount in Q4 FY26 and that management is “reasonably certain” no further material financial adjustments are required beyond those already recognized.
Higher operating expenses also weighed on profitability.
Operating expenditure rose to ₹6,249 crore in Q4, up 12% sequentially and 25% year-on-year, driven by the opening of around 80 new branches and employee increments. While expenses are expected to remain elevated in Q1FY27, they should start to normalize from Q2 onwards, management said, adding that operating expenditure growth for FY27 is seen at 13-14%.
Vaidyanathan said expenses were high because the bank is in a stage of growing its portfolios unlike larger banks which are functioning on minimal incremental expenses.
“You see, liabilities are something that is loss-making, I don't deny. Credit costs are loss-making, gold loans is loss-making, in home loans the new prime book is loss-making, I don't deny. Because these are things which we are building for the future. Some of the rural book we're building is also loss-making,” he said.
Loans and advances grew 20% year-on-year and 4% sequentially to ₹2.9 trillion. Net interest income rose 15.7% year-on-year and 3.4% sequentially to ₹5,677 crore.
Net interest margin improved to 5.93% in the March quarter from 5.76% in the previous quarter, though it was slightly lower than 5.95% a year earlier. Going into FY27, management expects margins to remain stable around the 5.75% level reported for FY26.
Going into FY27, management expects NIM to remain stable around the 5.75% level reported in FY26, given that the bank also plans to continue to grow its lower margin accretive wholesale and business banking portfolios.
