AU Small Finance Bank on Monday denied any wrongdoing in the alleged fraudulent opening of accounts after the Haryana government de-empanelled it from undertaking government business in the state. 

The Haryana finance department issued a circular stating that AU Small Finance Bank and IDFC First Bank have been de-empanelled “with immediate effect till further orders” over the alleged fraudulent opening of accounts. 

The development follows IDFC First Bank’s disclosure on Sunday of a ₹590-crore fraud committed by its employees and others in accounts held by the Haryana government with the private sector lender. 

Clarification by AU Small Finance Bank

In a regulatory filing late Sunday evening, AU Small Finance Bank said the government account in question was opened after completing all necessary KYC checks and obtaining required authorisations. 

According to the bank, the account was opened with an initial credit of ₹25 crore transferred from a large private sector bank. Subsequently, additional credits of ₹47 crore were received through multiple transactions from another private sector bank, identified as IDFC First Bank. 

Preliminary findings by AU Small Finance Bank

Of the total credits received, ₹47 crore was transferred to a customer account through 14 transactions. “As per the bank’s preliminary findings, all these 14 transactions were initiated by the Haryana government department concerned, duly authorised, and executed in accordance with the instructions provided by the department in the normal course of business,” the bank said. 

ALSO READ | IDFC First Bank hit by ₹590-crore fraud at its Chandigarh branch

It added that it maintains a complete audit trail, including account opening forms, KYC documentation, cheques, transaction instructions, verification call details and supporting records, which have been submitted to the concerned government department. 

The account was closed on January 15, 2026, following instructions from the department, and the outstanding balance of ₹25 crore along with accrued interest was transferred back to the original large private sector bank, the lender said. 

“Based on available facts at this stage and preliminary review, there is no indication of any financial impact or any fraudulent activity towards the bank,” it added. 

The bank further said its board has been informed and an internal review is underway to ensure a fair and transparent examination of the matter. Certain employees have been placed off duty pending the review. 

As of February 17, 2026, AU Small Finance Bank had total deposits of ₹735 crore from the Haryana government, which declined to ₹538 crore as of February 21, 2026 across accounts. This represented about 0.4% of its overall deposits as of December 31, 2026, following the de-empanelment. 

The lender said it remains committed to strong governance, transparency and safeguarding public funds, and will continue to engage with the Haryana government for re-empanelment while communicating with other stakeholders. 

Shares of AU Small Finance Bank fell as much as 6.18% to ₹965.30, taking its market capitalisation to ₹72,547 crore. Shares of IDFC First Bank tumbled up to 10% in opening trade on Monday after the fraud disclosure.