AU Small Finance Bank denies defrauding the Haryana government
What's the story
AU Small Finance Bank has denied any wrongdoing in the alleged fraudulent opening of accounts. This comes after the Haryana government de-empaneled both it and IDFC First Bank from conducting any government business. The decision was taken over allegations of fraudulent account openings. However, AU Small Finance Bank has clarified that all accounts were opened following necessary KYC checks and authorizations.
Official notice
Both banks barred from handling government funds
The Haryana government's finance department issued a circular stating, "IDFC First Bank and AU Small Finance Bank are hereby de-empaneled for government business in Haryana with immediate effect till further orders." This means both banks are barred from handling any government funds. No deposits, investments, or even transactions will be routed through these banks.
Fraud revelation
IDFC First Bank revealed ₹590cr fraud
Yesterday, IDFC First Bank revealed a ₹590 crore fraud involving its employees and others in accounts linked to the Haryana government. The bank said it had received a request from a Haryana government department for account-opening and transaction details related to one specific account opened by the department. This was followed by another request seeking information about suspected unauthorized transactions between this government account and another customer account with the bank.
Bank's defense
All transactions authorized by Haryana government department: AU Bank
In response to the allegations, AU Small Finance Bank clarified that the government account in question, was opened with an initial credit of ₹25 crore from a big private sector bank. This was followed by additional credits of ₹47 crore via multiple transactions from IDFC First Bank. The bank said all these transactions were initiated by the concerned Haryana government department and were duly authorized, and executed as per instructions provided by the department.
Ongoing investigation
Internal review initiated by AU
AU Small Finance Bank has initiated an internal review of the matter. The bank said it is engaging with the Haryana government to understand the reasons for its de-empanelment and will fully cooperate with any authorities as required. As of February 17, AU had deposits of around ₹735 crore from the Haryana government, which has now been reduced to around ₹538 crore after this de-empanelment decision was made.