Mumbai: AU Small Finance Bank has clarified that its recent de-empanelment by the Government of Haryana for government business does not indicate any financial irregularity on its part, and that a preliminary internal review has found no evidence of fraud involving the bank.
In a regulatory filing under SEBI’s Listing Regulations, the Jaipur-headquartered lender addressed media reports and investor queries that surfaced after Haryana de-empanelled it along with another private sector bank. The development followed disclosures by IDFC FIRST Bank regarding suspected unauthorized and fraudulent activities at its Chandigarh branch involving certain government-linked accounts.
Timeline of events
According to AU Small Finance Bank, it first received a communication dated February 16, 2026 from a Haryana government department seeking account opening and transaction details for a specific government account maintained with the bank. The requested details were furnished.
On February 18, the department sought further information regarding suspected unauthorized transactions between the government account and another customer account within the bank. On the same day, the Finance Department of Haryana informed the bank about its de-empanelment for government business in the state.
Account transactions under review
The bank said the concerned government account was opened with an initial credit of ₹25 crore transferred from a large private sector bank. Subsequently, additional credits of around ₹47 crore were received through multiple transactions from another private sector lender that had recently disclosed suspected fraudulent activity.
Out of the total credits, approximately ₹47 crore was transferred from the government account to a customer account through 14 transactions.
“Based on preliminary findings, all these 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,” the bank said.
It added that it maintains a complete audit trail, including account opening forms, KYC documents, cheques, transaction instructions, and verification call records, which have been submitted to the department.
The government account was closed on January 15, 2026, as per departmental instructions, and the outstanding balance of ₹25 crore along with accrued interest was remitted back to the originating large private sector bank.
Limited deposit exposure
As of February 17, 2026, AU Small Finance Bank held around ₹735 crore in deposits from the Haryana government, which declined to about ₹538 crore as of February 21 following the de-empanelment. These deposits account for roughly 0.4% of the bank’s overall deposits as of December 31, 2026.
The bank said its board has been informed and certain employees have been placed off-duty pending review to ensure transparency. It is also engaging with the Haryana government to understand the reasons for de-empanelment and seek re-empanelment.
Reiterating its commitment to governance and safeguarding public funds, the lender said there is “no indication of any financial impact” on the bank at this stage, even as internal reviews and official engagements continue.