IDFC First Bank's FY2025-26 record carries an unqualified audit opinion, but that record now rests on an incomplete forensic review of a ₹645.59 crore employee-collusion fraud at a Chandigarh branch. The fraud wiped out nearly a quarter of reported profit, and the bank's economic obligations run deeper than its reported borrowings through lien-marked deposits, IBPC-netted advances, and a ₹7,500 crore preference issue.
Key findings
- A branch fraud wiped out nearly a quarter of FY26 profit
Major- Unauthorized activities by employees at a Chandigarh branch in collusion with external parties led the bank to pay ₹645.59 crore in claims, booked as an expense, with an FMR filed with RBI on 07 April 2026. The FY2025-26 AGM notice states PAT was ₹1,636 crore, and excluding the fraud impact PAT would have been ₹2,119 crore. The standalone audit opinion for FY2025-26 was unqualified, issued on 25 April 2026, while the KPMG forensic review commissioned on 22 February 2026 has no disclosed completion date. - Reported borrowings understate economic obligations
Major- Deposits include ₹21,942.98 crore of lien-marked balances as of March 31, 2026, up from ₹19,804.58 crore a year earlier. Advances are reported net of ₹6,050.00 crore of Inter Bank Participation Certificate borrowings as of March 31, 2025. The bank issued ₹7,500 crore of compulsorily convertible preference shares carrying an 8% cumulative dividend and preferential rights over equity on winding up, converted into equity in October 2025. - Profits are shaped by reserve drawdowns and one-time gains
Major- The eIDFC Limited merger eliminated ₹8,796.38 crore of securities premium through a Merger Adjustment Account debit. During FY2025-26, the bank drew down ₹95.00 crore from Investment Fluctuation Reserve and reversed a ₹133.91 crore provision on one corporate borrower to General Reserve. In Q1 FY27, management disclosed profit of ₹1,075 crore includes a ₹181 crore treasury gain and an income tax refund benefit. - A related-party deal with Goldman Sachs breached approval rules
Minor- The bank entered into ₹1,750.29 crore of Treasury bill and government securities transactions with Goldman Sachs (India) Capital Markets from April 1, 2024 to December 31, 2024, without prior shareholder approval required under Regulation 23. The breach arose from a single purchase of ₹1,172.77 crore in the last week of December 2024, exceeding the ₹1,000 crore threshold. Shareholders ratified the transactions on March 19, 2025 with 99.82% votes in favour. - A structural PSL shortfall costs about ₹250 crore a year
Minor- Management confirmed in Q1 FY27 that the bank is "still short" on Priority Sector Lending requirements and "lost about INR250 odd crore" in FY26 on PSLC purchases. The shortfall is an operational drag rather than a concealment, with the cost disclosed in management commentary. - COVID-era standstills flattered asset-quality optics
Minor- Had the Supreme Court interim order of September 3, 2020 not existed, gross NPA and net NPA as at December 31, 2020 would have been 4.18% and 2.04% respectively, against reported figures that excluded accounts not classified due to the standstill. The bank made additional COVID-19 provisions of approximately ₹1,775 crore for the half-year ended September 30, 2020, in excess of prescribed RBI norms. - The group is one loss-making subsidiary plus two written-off toll-road associates
Minor- IDFC FIRST Bharat Limited, the sole subsidiary, reported a net loss of ₹43.49 crore in FY26, reversing from a net profit of ₹9.46 crore in FY25. The bank infused ₹110.00 crore of equity into IFBL during FY2025-26. Millennium City Expressways and Jetpur Somnath Tollways, both associates, are fully provided for, and the RBI has directed the bank to divest its 26% stake in Jetpur Somnath to 10% or less. - Related-party toll-road exposures were fully written off
Minor- Loans and investments in Millennium City Expressways and Jetpur Somnath Tollways have been technically written off or fully provided as at March 31, 2026. Interest income from Millennium City Expressways rose from ₹8.93 crore in FY2020-21 to ₹18.73 crore in FY2022-23, before the write-off. Services received from IFBL grew from ₹372.62 crore in FY2019-20 to ₹771.64 crore in FY2022-23. - Auditor rotation follows the standard RBI tenure cycle
Clean- The bank has rotated through four joint statutory auditor combinations in six years, each appointment following the standard RBI tenure cycle with no stated adverse reason. Total statutory auditor fees were ₹2.65 crore in FY2023-24, ₹2.40 crore in FY2024-25, and ₹3.00 crore in FY2025-26.
What to watch
- KPMG forensic findings. The independent forensic audit commissioned on 22 February 2026 has no completion date disclosed in the FY2025-26 Annual Report.
- RBI supervisory response. The regulator's response to the ₹645.59 crore fraud reported in Q4 FY2025-26 remains outstanding.
- Jetpur Somnath divestment. The RBI-directed reduction of the bank's 26% stake to 10% or less, as disclosed in the FY2025-26 Annual Report.
- ECL framework transition. Management stated the capital impact "could be quite neutral" but declined to provide a specific run-rate number as of Q1 FY27.
Bottom line: This is a disclosed and audited record with an unqualified standalone audit opinion, but the audit sign-off now depends on a forensic review that has not concluded. The fraud is the acute event; the structural features are the lien-marked deposits, the IBPC netting, and the preference-share obligations that sit outside reported borrowings. Watch the KPMG findings and the RBI's supervisory response first, then the Jetpur Somnath divestment and the ECL transition.