AU Small Finance Bank statement comes in wake of reports of fraudulent activities reported by another lender IDFC First Bank relating to account involving Haryana government.
IDFC First Bank Ltd has appointed KPMG to initiate an independent forensic audit into the Rs 590 crore fraudulent activities by certain employees at a particular branch in Chandigarh in the account relating to Government of Haryana.
In a statement, AU Small Finance Bank said it received a communication dated 16 February 2026, from a particular Department of Government of Haryana, seeking account opening and transaction details relating to one specific account opened by the said department (“Government Account”). All requested account‑related details were submitted.
On 18 February 2026, AU said it also received a separate communication from the department seeking information regarding suspected unauthorized transactions between the Government Account and another customer account (“Customer Account”) maintained with the Bank.
Additionally, on 18 February, Finance Department, Government of Haryana, communicated to the Bank about its de‑empanelment for Government business in the State of Haryana, AU said.
AU said it initiated an internal review on the issue and confirmed that both the accounts were duly opened after completion of all applicable KYC checks and requisite authorizations and in accordance with the Bank’s internal policies and processes.
AU said it also reviewed all the transactions in the said Government Account.
The said Government Account was opened with an initial credit of Rs 25 crore transferred from a large private sector Bank. Additional credits of Rs 47 crore were subsequently received through multiple transactions from another private sector Bank, which has recently provided public disclosure of unauthorized and suspected fraudulent activities, it said.
Out of the total credits received in the Government Account, Rs 47 crores were transferred to the Customer Account through 14 transactions, AU said.
As per its preliminary findings, AU said all the 14 transactions were initiated by the concerned Government Department, duly authorised, and executed in accordance with the instructions provided by the Department, in the normal course of business.
AU Bank said it maintains a complete audit trail and all details including account opening forms, KYC documentation, cheques and other transaction instructions, verification call details and supporting records which have been submitted to the concerned Government Department.
The Government Account was closed on 15 January 2026, as per instructions from the Department and the outstanding balance of Rs 25 crore along with accrued interest was transferred back to the original large private sector bank, it said.
AU said its board has been informed and it continues its internal review on the issue.
To ensure a fair and transparent review, certain employees have been placed off duty, it said.
AU said it is also engaging with the Government of Haryana for assessing the reasons for de-empanelment and will fully cooperate with the Government and any other authorities, as required.
As on 17 February 2026, AU Bank had total deposits of Rs. 735 crore from Government of Haryana which has reduced to Rs. 538 crore as on 21 February 2026 across 200 accounts (0.4 per cent of Bank’s overall deposits as on 31 December 2026), post the de-empanelment.
AU said it will continue to engage with Government of Haryana for re-empanelment.
