Ladies and gentlemen, good day. Welcome to the conference call of IDFC FIRST Bank on recent developments. As a reminder, all participant line will be in the listen- only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V. Vaidyanathan. Thank you. Over to you, sir. Good morning, everybody. This is Vaidyanathan. Good morning, everyone. I am Sudhanshu Jain. Hi. Good morning, everyone. This is [inaudible]. Yeah, maybe, I'll, before I invite Mr. Vaidyanathan, maybe I'll just give a brief synopsis of the matter. We did make a press release on February 21. Just for context, I will just lay out the issue once again. This matter pertains to a particular branch in Chandigarh and is confined to a limited set of Haryana government-linked accounts. The main issue which we have observed here is that certain employees of this branch, most possibly in connivance with external parties, have fraudulently transferred these amounts to beneficiaries who had accounts outside of our bank. These accounts are also expected to be suspicious. These could been done in connivance with third parties, the details of which will emerge post the forensic audit, which we have initiated with KPMG, and further investigations by law enforcement agencies and so on. We can assure that the bank has acted very swiftly and decisively to handle this matter. A ll employees whom we currently suspect have been suspended. There is no senior management involvement in the, in the entire incident as far as we understand currently. We have conducted proper fraud management committee meetings, board, governance, and audit committee meetings. As I said, KPMG has been appointed to do the forensic audit. We have kept regulators informed, auditors informed of this matter. We, in terms of actions, we have already filed police complaints, and we are engaging with other law enforcement agencies. We have also initiated recovery and lien marking actions across the banking system. These are certain actions which we've already taken. We have existing controls in place. Of course, in light of the incident, we will try to enhance certain more controls as we sort of move along. I can assure you that this issue is confined to only this branch. There is no impact as such on any other customer or any other branch which has come to our notice. In terms of financial impact, the discrepancy currently found is about INR 490 crore. We have additionally, where we have received certain reconciliation requirements. Through the reconciliation, we observed that there is a discrepancy of INR 490 crore. We have additionally estimated INR 100 crore. That's how it comes to an INR 590 crore of an impact, which we have put out in the press release. We have put out this number as we could best assess at this point of time, but we feel that the number is broadly appropriate to the situation, current situation. We don't anticipate this to broadly move from here on to a great extent. It could be small. As we sort of go through the, through the process, maybe these numbers could slightly change. Again, want to assure that the bank is well capitalized. As you would recollect in the previous earnings call also, we have said that the profitability of the bank is on a positive trajectory, because we expect credit costs to keep coming down, and we also expect improvement in net interest margin during the fourth quarter. Hence, whatever is the outcome of this exercise, we should be in a comfortable position to subsume that. We are making all efforts to trace the flow of funds and seek appropriate restoration of funds. With this, maybe I'll ask Mr. Vaidyanathan to add, add further color on this one. Yeah. Good morning, everybody. Thank you very much for joining this call. A few investors called us yesterday and told us that, you know, that the information that we provided in the note to the exchanges is quite detailed, but still the impact, the financial impact is not well understood, whether this entire amount will be hit to the P&L, whether the recoveries will come, et cetera. That's where then we thought to ourselves that we should take this investor call right now and explain to you what the im- implication is. This is broadly the subject of it. Before we come to the financial implication, I must just say that this is a specific, isolated incident that happened in one branch, with one client group, which is the group that has been named out there by us. Therefore, we should, we will, you know, this is basically a case where debit instructions have come, supposedly from the, from the client, which our, which our people, which clearly to, to us, indicates a fraudulent activity, have passed the entries and have transferred the money to certain parties outside the bank, from the client's account. They've also used checks when in looked, in hindsight, looks forced, but someone has cleared it. This looks to us, on the basis of the work we've done, clearly a case of an employee fraud, and it also, our internal fingerprints and our, our details are quite clear that external parties are also involved here. This is a serious matter for us. We have run this bank now for, for, you know, the, for, for 10 years, and we have never seen an instance like this, of this order of magnitude, certainly not. The bank has really excellent controls across the, across the system. As you know, we are a very technology ahead bank or technology-first bank, and on all fronts, like mule and AML, et cetera, bank is doing, you know, very well in terms of overall numbers and controls and so on. This is not a digital transaction. This is a physical transaction where people have come, you know, the, the checks have been forged. This is the, let me say, the oldest kind of fraud probably known to banking. So, how this has happened is obviously happened with the connivance of employees. There is maker, checker, authorizer, the whole system exists, but obviously there's some, you know, bunch of people have come together to make it happen. We will get to the bottom of this. We will spare no one. You know, we have, we have quickly moved in. We have, you know, appointed a forensic auditor for this, KPMG, and we will expect them to move, you know, in great diligence and move very fast. You know, we will take the full support of the law enforcement of the, of the, of the country. Really, I can tell you, we will spare just no one, and, we will, take it as it comes. Now, as far as the bank is concerned, I'd like to specifically share with you that we, the bank, is now fundamentally in a strong position. Just to share with you that the, that, that the operating profit of the bank has now crossed 2%, which was earlier 0.5%. Basically, on the core, core of the bank, it is now, the bank is in a very strong position and, and, and therefore, and, and the graph is rising. Uh, we have already guided to you earlier that on the basis of the trajectory and the incremental unit economics, we expect this to, you know, further go upwards of about three point five percent in due course, as the bank fully evolves based on the, uh, the, the rates at which you borrow, and the rate we lend, and then the margin we enjoy, uh, which is upward of five point eight percent or five point, uh, seven percent last quarter, but this quarter we expect to have five point eight. So on the basis of that strong strength, we feel that this is, uh, this is an incident, um, uh, that will pass, but this incident will not, uh, this incident will pass through the, through the P&L as and when it comes, and we will take it out. But I can tell you this incident will not pass through our memory, because this is a very significant event for us, and we will really just scan every nook and corner of the bank for any such, you know, process gaps, if any, or any employee collusion, fraud, et cetera. We will make the necessary amendments to, to, to, to, to contain this, you know, from, from here on. We have done a discussion with our employees last night, you know, across the country. People have come across and said that, that, they are, they are holding fort very well. They're comfortable with the situation. Every one of them is proud about the fact that they're working with the bank, and the bank is dealing with all matters so clearly, ethically, decisively, and transparently. They are very proud of the service levels of the bank. They're proud of the technology we provide, the product, proud of the products we provide to the customers, which are really customer-first products, about the, the way we deal with the customers. There is a strong degree of confidence in a cultural sense. There is a strong degree of confidence in the, in the people. Our board has been taken through the full matter, and they have given certain guidances, but at the same time has full, full support. We have taken the regulator past the matter, and they have given us their inputs and guidance. We have spoken to a few media channels who talked to us yesterday. We have done, you know, we have been all of yesterday being in-involved in dealing with the situation. I can broadly tell you that the bank is in full control, and transactions across the country are, will happen smoothly. This is an isolated case. In the last five years, seven years, we put up over 1,000 branches, you know, cumulatively, maybe over 1,050 or 60. We have really not seen any incident of this nature, that, that has, that has happened here. But this, but, but this incident is a, is a further, opener for us. We will, check one more time, implement necessary controls, and, keep going. I do feel that, you know, a quarter ahead, you, hopefully, you will look through this, through this incident. Once again, for people who have joined the call, you know, thank you for joining, and, feel free to ask the questions, please. Thank you so much, sir. Ladies and gentlemen, we'll begin with the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Thank you. Our first question comes from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Hi, sir. A few questions. Firstly, in terms of the impact, as you indicated, the aggregate amount involved in the reconciliation is almost like INR 590 odd crore. Given that the money, maybe, the other bank has also filed in terms of the credits being received from us to the extent of, like, say, INR 2,547 odd crore. So in that sense, would this entire amount be repayable to the Haryana government and the liability lies on us? So this will be like something like the entire financial impact that will have to be taken through the P&L, or is there any other way? Is there some money which is still available in those in those particular customer accounts at this point in time? This, you know, basically we are doing a, you know, layer by level 1, level 2, level 3, meaning layer 1, layer 2, layer 3. We're figuring out where the money has gone. You know, to the extent that there are monies lying in the account have not left the system, to that extent, of course, we will, we will be able to, block the monies and try to recover those dues. If you can just quantify in terms of how much of the money would have been left, how much is the total Haryana government deposits, and what would be the total government deposits for IDFC Bank? Yeah. To, Kunal, I'll come in. The total Haryana government deposits are roughly 0.5% of our total deposits, so it's not that meaningful in that sense. Since, since the notification, which came a couple of days back, we have seen an outflow of about INR 200 odd crore here, but we feel since the overall number itself is small, it should be quite manageable. Okay. Okay. This 0.5% would be after, this INR 200 crore of outflow? Yeah, I'm saying even if. For a bank. For that, the number is. For a bank of about INR 280,000 crore of deposits, like, INR 200 crore is, you know, not the item. Yeah. Yeah. Any ways wherein this would have been avoided and now looking at the internal controls, what we would put in place in terms of authorization limits with respect to a particular ticket, would that have really helped? or maybe there wouldn't have been any way because there would have been the connivance with the external parties as well, and maybe it shouldn't have been avoided. what internal controls, processes, how stringent we would get with, particularly with respect to the government accounts and government business with this incident? The thing is that at this point of time, even as we speak, you know, there are excellent controls, you know, which, which obviously, you know, has, has, has failed in the case because of collusion. Let me just share with you the, the controls itself in any case. You know, there is a proper governance framework. There are defined SOPs. There are, you know, there is an authorization framework. There is a maker, checker, you know, authorizer systems in banks as in case, certainly in the case of ours. There is a, you know, there is a process for even normal customers, not just for government, not for large transactions, but for individual customers, there's a positive confirmation from customers. For transaction value above INR 5 lakh, the branch staff calls the customer to confirm the transaction before processing the check. The, you know, the bank also offers customers a, you know, a system of something called Positive Pay, where the customer can positively confirm the check issued by them, meaning that the customer is issued a check of a certain amount, customer can come to the app and specifically operate the transaction. That's a Positive Pay. These things, you know, do exist. Of course, the Positive Pay, with the customer has to specifically come and voluntarily subscribe to it, because we cannot enforce it, because then checks will, you know, even genuine check, check may, may return. The other thing is that, you know, there is a additional, you know, verification of high-value transactions, for transaction value about INR 10 lakh. You know, additional verifier verifies the transaction has been correctly executed by the maker, checker. There are really many, many, many checks and balances. The issue in this case is that, you know, many of these people connived in, in, in making it happen. Now, in terms of, you know, what new controls, you know, we will, we will implement, this is, there's a quick one on the basis of the last 3 days' work. Of course, you know, we will do more as the days progress. We are, you know, planning to put an explicit system based on confirmation of high-value transactions. You know, for branch-based transactions exceeding a predefined threshold, we will take an explicit confirmation from the customer, and we will make it mandatory. The customer's confirmation will then be captured through a, you know, a verified digital channel, with a stipulated window. Meaning that the customer, you know, we will-- for, for example, if you want to clear a particular transaction, we don't have to really call you. We will, you know, trigger a, trigger a, an alert for you, for, for you to specifically go to your app and say that, "Yes, please clear the transaction." So this is a, specific, you know, control we'll bring, extra control. Now, with the arrival of AI, we are also going to additionally bring, you know, currently, you know, if a, before the arrival of AI, until, until the banking till date, you know, the, the authorizer, the ba- the branch manager, physically, he sees the check and, he confirms signatures are matching and clearing it. But now we will put a system whereby through AI, you know, this is AI will do an initial, initial checking, and then it will be double confirmed by the human. So therefore, exceptions handling will be, will be, will be, will be better controlled. So we will. See, this is not an electronic transaction, so to say, this is, you know, a physical check, manual check, a debit instruction that has come, and like I said, the most traditional kind of fraud that has happened here. So we will improvise upon that and put some new controls on this. Frankly, we definitely feel that the overall, the bank's overall system at the bank is something that will further enhance based on the experiences we get from this incident. We will deeply study how collusion happened and how we can prevent a collusion that could be the other other root matter. Further to add, just one more thing. Further to add, we had also sent out transaction alerts, monthly bank statements, monthly balance confirmation we had sought. All of those processes are done through systems, and those controls are very much in place. That's an important point Sudhanshu has raised. Yeah, you know, even, even in this case, you know, SMS alerts have, have gone, balance confirmation certificates have gone. All that has been going on in this case as part of the process. Sure. You don't see any potential contingent effect of other state governments' decision in terms of how they allocate the government business to this, the empanelled banks? Would there be a risk on that front? We will have to take it as it comes, but, you know, we are a bank with a strong capital adequacy, with a good rating. As you know, we are rated AAA by CRISIL on fixed deposits and AA+ in the long-term rating of the bank, which, by the way, has got upgraded twice in the last five years from AA- to AA and from AA to AA+. You can clearly see the direction of travel of the bank rating. Our net worth is over INR 46,000 crore. Our, you know, our customer business, which is both deposits and loans, is now at INR 560,000 crore, and you can see the growth over the last 5 years. You can see how the operating profit has risen from, you know, a few thousand INR crore to over INR 7,000 crore. The bank is on a very strong trajectory. We feel that people will take care of it, and we are very sensitive to all government accounts as much as we are with, with end customers. Our intention is not to really, you know, to litigate this or anything like that. If we have made a mistake, we will own it up straightforward, and we will do what, whatever requests to be done. If there is anything in the gray zone where we feel the counterparty been involved, and employees or counterparties are involved, we will speak with them as as as as conducively as possible and try to find a meaningful solution. We, we, we basically don't mean to given a choice, you know, we, we don't mean to litigate this unnecessarily. We, we believe that, you know, in fair, completely being fair, and if something is our responsibility, we will admit it, and we will move with it. Sure. Sure. That helps. Yeah. Thanks, thanks for answering all the questions. Thank you. Our next question comes from the line of Piran Engineer from CLSA. Please go ahead. Yeah. Hi, good morning. Just my first question is, how long did this fraud go on before it was uncovered? Some of these questions will be difficult to answer at this stage because, you know, there are implications, you know, as, as we speak, there, there is a, there is a, this can become a legal matter, and anything we say at this point of time will be, we'll have to be very careful. Let me just say that it is in a, in a significant way, when, as we put out in the stock exchange, when we first got the, you know, the, you know, Haryana government's request to transfer funds to another bank. At that stage, you know, the bank saw that the money was not reconciling as much as the government, department thought, was there in the account vis-à-vis what was actually in the account. Which, which probably was a month ago, and, but it accelerated during the last three days, from February eighteenth onwards. Let me say, largely, the actions that have been taken, have been the moment we spotted this after, February eighteenth. To date, is when the action has accelerated so, so much here. Just to add that whatever these requests which, where, which we have received so far, there the difference or the discrepancy, which we have observed currently is to the tune of about INR 490 crore. Additionally, we have scanned the rest of the accounts as well, from where we have self-identified about INR 100 crore. That's why we feel that the impact or the discrepancy amount could be more around the INR 590 crore, which we've quoted in the release. Of course, as Vaidya said earlier, these numbers could move from here. We could also get recoveries through these accounts. The legal process could itself establish and validate some of these claims. We would give an update once this entire process is concluded. This INR 590 crore is the summation, as Sudhanshu mentioned, is the INR 490 crore, is what to the, to the extent when they ask for balance confirmations vis-à-vis what we saw in the bank, of the bank account of those clients. That is the difference. That is INR 490 crore. INR 100 crore, Sudhanshu mentioned, is the extra diligence that we've went and checked other bank accounts and so on and so forth. This is a bit of our own e-estimate, you know, at this point of time. But, you know, we think we're broadly right i, in the, in the numbers we put out, and we put it out in good faith, the extra INR 100 crore. Now, now, the next, next point is on this front is that, you know, like, like Sudhanshu Jain said, that, the, if there's any recovery that comes to the process, we will, that the impact will be reduced to that extent. Hopefully, not extra any more claims are going to come. We, we don't know, but we will deal with it as it comes. But, you know, we, our, our good faith assessment is that this point of time, this is approximately the number that, that we said is approximately correct. Sorry, just one more thing to add. No problem. We also have an employee dishonesty policy. Of course, the amount there is about INR 35 odd crore, so to that extent, some amount could be negated. Some amount could be negated to the extent of. INR 35 crore? Yeah, employee dishonesty policy, which we have taken at a bank level. Okay. To cover some, some of these, Insurance. Okay. Yeah. Got it. Got it. We, so, so the final, so the final impact, you know, there are, you know, will depend on some of these factors: recovery, the insurance that we have, any extra claim. You know, we'll take it as it comes. I want to just say, Piran, that whatever it is, we will, we will deal with it. Decisively deal with it in, in a, in a, in a matter that is most fair and appropriate according to our, you know, as it goes. Yes. No, see, my question came from the point of view, if, if it's been happening for a long time, you know, it's also then the fault of the Haryana government, and then they should pay up for it. Why should the bank pay up for it? Is how I'm thinking. No, we have not concluded what. If their own officials have done that, then why are we liable? Yeah. See, that's the reason I said that, you know, we are not putting out any specific number right now as to what we will provide for, not provide for, et cetera, because, you know, there's time between now to the next results. We'll think the whole thing over because if counterparties are, like, you know, you, like the ones you are mentioning, are, If that component is identified or covered, I'm sure, they will also look into the matter. There could be the third parties where the money has been transferred out. We will really go hell or leather up to those people as well. We will take this as it comes. We have put out the, in our best estimate, the outer limit of what, what could happen to, in, in, in a sense, and then, you know, take it from, from there. As you know, we don't postpone things. That's the reason instead of accounting as 490, we put it as 590, because we really don't want to postpone and leak the market with more and more news. We have proactively done extra work, proactively identified extra accounts, proactively put INR 100 crore into it, and then hoping that, you know, that's how we, we, we, we, we, we, we, we do this. As you, all of you who know us for maybe 15, 20 years, would know that we don't postpone things when, when it comes to accounting or governance. Got it. Also, like, is there a chance that employees one level up are also involved? If the maker-checker process is there, ideally, the checker should be someone who is not in touch or knows the maker. Well, we'll really come to know during the forensic audit, and everybody will be investigated, and the trails and everything will be checked, and we will identify this and get to the bottom of this. Got it. Just lastly, overall government deposits with the bank would be how much? Like Haryana is 0.5%, all put together. I think it will be in line with broadly the industry standards, would be about, for us also, it's about 8%-10%, somewhere in that range. Got it. Got it. That includes, that includes central government, state government, and frankly, many of these organizations have a, you know, long track record with us for running back to 7, 8, 10 years. You know, it's, it's just not about just deposits, just for your information. It is basically providing a bunch of solutions. On the solutions front, you know, like many of you are, are our customers' customers, and, you know, you, you, you hopefully, you, you, you have seen the quality of the services we provide at the branch, on the internet, on the mobile banking, on the call center, et cetera, and the products. Similarly, on the government banking side also, it's, it's not only about taking deposits from them. We are providing solutions from them. We are deeply integrated with them. We collect tax for them, you know, both the state taxes as well as central taxes, you know, the GST, the CBDT, and so on. Just want to let you know that it is not the bank is taking some deposits with the government, from, from government, we are giving deep solutions to them. For example, we, we, you know, these are end, end-point customers that we collect from and, and, and pay them the taxes, and there's an agency business running here. We have a deep, you know, thick relationship with, with, with all of them. The, and, and therefore, we believe that this will be a matter that we will, that we will be able to handle and manage comfortably. The, the, the, the business of the bank is growing, so it is obvious that, that the services of the bank are, are appreciated by them for that, that the, that the business is expanding with IDFC in this case. As you know, deposits of the bank is growing by about 20%-25%, and similarly, government banking business is also growing by that order of magnitude. We have deep relationship with these people, and I don't think we should really concern that the whole system will, will have a concern or anything like that. But we will still, you know, improve on our services, services from here on. Got it. Got it. Yeah. Okay, that's it from my end. Thanks, and all the best. Thank you. Thank you. Next question come from the line of Vincent from Principal AM. Please go ahead. Yeah, thank you for taking, making this call. I'd like to ask, since February eighteenth this year, what other communications from other government related or linked clients or accounts, have we received, related to this matter? Nothing, nothing. Apart from what has come from this government, state government department, nothing else. Like I said, we are enjoy good relations. No other? Yeah, no other, no other. The, and the, like I said, we enjoy a good, good relationship with the ecosystem, and then the, we are deeply integrated. It's a very important point for you to take note of. It's deeply. Like, system to system, host to host integrations are on. It's a running machinery. It's not only that somebody's left deposits with us. To your second point, of course, that the, the, the even for this, in this case, like someone else pointed out, that looks like there is a connivance of multiple parties, and therefore, why IDFC FIRST Bank pay for this? The, the, there are multiple. You know, we are evaluating all of these things in a legal, legal sense. Our general approach is, yeah, I'd like to say that our general approach is that if we feel with a hand on heart that this is our bank's mistake, then we will not litigate these things. We, we will, we will, we, we, we will pay up. If we feel that there are multiple parties involved and other people also has to have responsibility, then we will go as per the process of law. We, we, we intend to deal with this in a amicable, amicable manner with the entire ecosystem. Vincent, just to add, just to reiterate, the discrepancies which we have got pertains only to this branch, no other branch. This is very important what Sudhanshu pointed out. I just want to re-keep reiterating that. Yeah, no, thanks for that one. The important point, you know, we, we, we are running over 1,000 branches. frankly, 1,000 branches for, you know, starting from, say, 206 branches in 2018 December to 1,000 today, more than 1,000. really, from 1,000 branches, we've not had these issues. 1 branch has happened, we. Nothing that we won't pay. It's a serious enough matter for us to learn from it. you know, it's 1, 1, 1 branch, 1 client group. we will deal with this. This is very isolated instance, and other employees of the bank are, you know, the check and controls of the bank are, are, are, are thick, are, are strong, and many of them are tech- technology-based. Mm. since five days ago, there's no other communications with other clients on this matter, yeah? No, we've not got any inward calls from any of these people, at all. I think since, since we're trying to size the impact, do we, by any chance, have insurance on this? Yes. Sudhanshu mentioned that a moment earlier. We have some employee dishonesty insurance of INR 30 odd crore in this case. INR 35 crore. INR 35 crore. Okay. And I, I think one last point is that based on what we know so far, you know, how is it that the client received statements monthly and did not realize, you know, this happened, yeah? No, this is indeed a good question. In this case, you know, these are system-triggered. This is important to note. You know, these are system-triggered SMS, email alerts, where every transaction have been sent, you know, and so on. Well, your question is something that will be examined as part of the process of evaluation. Therefore, hopefully, you know, people, the respective responsibilities will be, assessed, and we will take it as it comes. The, the client acknowledged that they received these statements? These are system-generated. Yeah. As I said, transaction alerts have been sent to the mobile number, and statements have been sent on to the authorized email IDs, and this has been sent on a periodic basis. Right. Yeah, yeah. Yeah, thanks for that, Sudhanshu. I just wanna understand, on receipt of the statements, and in fact, in the last five days, did the client acknowledge that they, you know, there was a lapse in a- in their process, and they have, in fact, received these statements? We, we, we feel that statements have certainly been sent and would have been received. One of the clients have come back with certain discrepancy, and then this reconciliation process is underway with few more clients, and that's how we have assessed the discrepancy amount. Of course, we will now wait for this process to get over. See, these are the kind of things that we got to, we will get into the depths of it, that the bank has triggered the alerts. As I... And, and in fact, there are normal clauses that if you find a discrepancy with the statement, please get back to us immediately. This is, this is normal banking, you know, convention, and, and disclaimers when, when banks are sent, because, when, when banks send statement of accounts and banks send SMS. These things have been, you know, are, are there, and these will come up as a subject of discussion during the during the whole process. Just, just one more, sorry. Yeah, I mean, since I think it's very important for any, any bank to get this right, which is the statements are true and accurate, it is just that the client was not aware that certain employees had initiated the debit. No, no, irrespective of the, the, the, who, whether the checks were forged and they were paid out, assuming that they were, when, when you look in hindsight and check the signature and assuming they're not exactly tied in to the T. So, so if, if, even if that be so, the bank has, the, there is a certain bank balance that is reflecting on the books of the account that has been sent out to the parties. Like we said, these are part of the evaluation of the processes that will come up, whether, you know, about the delivery, about, the responsibilities, and so on. We will, we will take it as part of the process, and we, we, we will, we will handle it as it comes. Well, sir, I just need to get this right, which is accounting for the fraudulent transactions, after that, the statements are true and accurate? Yeah, sir. The statement. Had the transactions happened, the balance are accurate? No, no, obviously, because to the extent. Let us say that a bank account has 100 rupees, and suppose 20 has been taken out, a check has been passed out to 20 rupees. The balance 80 is the balance in the books of the account, and that is what the statement of account will go for. Okay. That was the bank. Yeah. That is what will go for. Right. There is no error. There is no, absolutely no error in the statement of account as such. The statement account is at absolute true. Okay, that's clear. This is very important. I'm so happy you asked this question. Thank you. Yeah. There's absolutely no error in the statement. Statement reflect what the system balance shows. If a transaction, fraudulent transaction has happened. All right. If it happened, that is gone. That is a fraudulent transaction. Bank balance is correct. The transaction is correct. It has happened. The customer has been told. There is absolutely no system error. System reported the correct balance, and customers were sent the right balance. Thank you. That's, that's, that's, that's very good. Thank you. Thank you. Thank you. That's all. Thank you, Sudhanshu. Our next question come from the line of Param Subramanian from Investec. Please go ahead. Yeah, hi. Good morning. My first question is on this forensic audit. What is the scope of this audit? Is it specific to the branch, or is it wider? When can we expect the outcome of this? Yeah, that's my first question. We are working out the scope at this point in time. Maybe Sudhanshu can throw light. Sudhanshu? Yeah. As I said, this incident seems to be just particular to this branch, and largely because of connivance of employees and maybe some parties outside. We're yet to finalize on the scope. We appointed KPMG only yesterday, so we'll get into some of those nitty-gritties in, during the course. Typically, depends on the investigation, of course. Typically, to my best of my understanding, these processes could take about four to five weeks to conclude. Four to five weeks. Okay. It is specific to the branch? Okay. Okay. Secondly, this was asked previously, what is the exposure of the bank to, say, all state governments and central governments, broadly as a% of deposits? I thought Sudhanshu just answered that earlier, no? Because it's, the. About 8%-10% of our total deposits, to state government, central government, PSB entities. It's been typically growing in line with the, with the, the overall book of the bank, so to say. Somewhere in that zone. Okay. Okay. On, on deposits, overall, I mean, I know it's very early days, but, do you think this can have any implication? I'm not talking about state government, but overall on your, say, higher value deposit balances? Because we have only started undertaking this journey of reducing our savings, account rates. Right? Is that something that you think will see some delays or, you know, because we are also following a strong growth trajectory? Any color on that, relatively? Secondly, we are talking about, say, you know, a tight control on costs going ahead. Will this have any implications on that? Because I heard you mention earlier that we are undertaking a review of our processes, et cetera. Any impact on, say, both of these things? Sorry, I didn't understand the last part, the review of, but let me fill it in for you because I couldn't hear you well. I got the spirit of your question. What I meant is I didn't hear the tail of your question, rest I heard. If I could mention that. Yeah, yeah. I meant, since we are undertaking a review of processes across the bank, I think you called that out. And of course, we are in the process of consolidating our costs. Will there be a, you know, impact of this on that? Okay, okay, I got it. Got the question. First of all, you see, the banks, largely, let me say, while, while this is a collusion of employee case, the bank systems are already in place. Let me, let me just, you know, share with you that for, for, for, for, for, for a bank to run so well, you may have noticed that it's been like, you know, 10 years, there has never been a single smell about the bank in the market, about, you know, either experienced by customers or even any incident like this. Obviously, let me just say that systems of bank are running really very, very well. This is a case of collusion. This is a case of collusion, with, of, of, of our employees with some counterparties outside. You know, this is a key risk to address is collusion risk. The, the, the systems as such are, are running, you know, are, are running, really well and fine. We don't expect that because of this, we have to put so many new controls that are going to impact the cost of the bank or nothing like that. I think it, it, we don't think so. If anything, if we incur a, you know, a, a small cost towards the perspe- part of control, it's probably a good cost to incur, but we don't expect any material costs coming from, from that. Your second question is, the bank reduced, interest rates so sharply recently. Well, the, the truth is, the fact is that we. Yes, we have, we have dropped interest rates, but the deposits are continuing to come well, from, from, you know, even after we dropped the rates, and it's quite comfortable. Number three, we believe that over the last, maybe, many years, maybe seven or eight years, the bank has built a really good brand. The bank has built, you know, Culturally, if you see, if you notice, the bank's appreciated for its, for its culture, even employees, how they experience the culture and how they spread the word around in the market, among their friends, families, relatives, and everybody has bank accounts with us. The smell of the bank is very, very good, which is a very difficult thing to achieve. It's not about advertisement. Advertisement is about how much money you spend, but experience is the hardest to gain. The bank has built that experiences. The bank has built, you know, in terms of deposit growth, bank has built a really good mobile app. Bank has built hyper-personalization capabilities. Bank has built, you know, you know, data, data lake, analytics, machine learning, artificial intelligence and hyper-personalization, anti-spamming rules, anti-repetition rules. These are like... Very good design layer, the UI/UX layer, the experience layer, and the response times are really good. What I'm trying to say is that the bank has built really good capabilities, relationship management, and service capabilities and service center. Bank has built such a fantastic stack of capabilities, but really deposits are coming from the full stack. That's very important to note. We believe that one incident of one branch in one location, you know, people will look through and deposit will continue to grow, and it was, as you know, anyway, results will come out. We'll share with you results of deposits this quarter also. Palem, just to add, we maintain. Yeah, yeah. liquidity levels. We will, of course, closely monitor the situation. Okay, fair enough. Yeah, I got very clear. Again, on liquidity, right? I mean, our, our LCR is at, like, 115%. It's a little lower than where the other large private banks are. As some abundant caution, say, from a near-term perspective, will we have some, say, higher liquidity buffers we'll be maintaining, so, you know, consequent near-term impact on margins? I'm just trying to understand, the implications from a near to medium-term business trajectory. Bank, bank always makes you know our bank. You know our bank. Yeah. We always keep high capital adequacy more than requirement. We always do retailization more than the, the requirement. We always keep more liquidity than more than requirement. We are, like, super, super conservative in the way we run the bank. You can see that the credit deposit ratio of the bank for seven years in a row, on an average for the last seven years, is 75%. Okay? 75%. It's been, it's been seven years on an average, on an incremental basis. The stock was, you know, higher. It's now come down below, you know, you know, to comfortable levels. Basically, you can see that incremental has been 75%. We, we runs, run the bank really very, very conservatively. We take no chances at all, and we have, we have very, very low levels of certificates of deposit. You could have heard from the market that certificate of deposit have gone up to INR 550,000 crore in the system. IDFC has hardly taken certificate of deposit. We keep it very low. We run the bank through core high-quality retail deposit franchise from individual customers. We run the bank. Not to worry, we always, these are our principles of running the bank: never take chances, and that's how we'll run it. One last last question, Vaidya, if I may. I mean, what is the gap that you think, I mean, you will be undertaking a review, but what is the gap versus some of the large private banks that you think, was there, if any? Or do you think this could have played out in any bank, in your view? You know, you, you did call out that you, we have been strong in our risk management, but this has happened at our bank, right? What is that gap, and what are we doing incrementally to bridge that? Clearly, clearly, employee collusion risk, you know, if a maker, checker, authorizer, everybody in a branch compromises with, with, with a counterparty on the outside and, and clears a fraudulent check or creates a fraudulent transaction, maybe in this case, even with the, with the multiple parties. This is the kind of a stuff that can happen, frankly, with the, you know, that can happen anywhere in the system. This a traditional, you know, the, the oldest kind of fraud of a check and, you know, that kind of stuff. Really, this, this is, but we, we, when we will also, you know, introspect on this, we should also think about, you know, our staff transfer policy, how, how maybe their own behavior, maybe we should be able to figure out more transaction pattern of how, how employees' accounts, and conduct are, you know, we, we, we need to think a little deeper about how we could have stopped, you know, dealt with the collusion. This is not a system failure. This is not an electronic system failure. This is not... The, the systems are, you know, running, holding us very well. This is a collusion of individuals. We will reflect on this. We will definitely reflect on this, and we will take some very decisive moves about, how we will prevent this, going forward. You know, we really would never want to see another incident like this, in our, in our lifetime in this bank again. We will make some very, very decisive moves. Thanks a lot, Vaidya. Thanks, Sudhanshu. All the best to you. Thank you. Thank you. Next question come from the line of Prakhar Sharma from Jefferies. Please go ahead. Hi, good morning, and thank you for doing this call in a timely fashion, and sharing the color. I just wanted to ask if it will be possible. See, the biggest question that all of us are trying to wonder is, is this, one branch, one government issue, or, is there any chance that, you know, maybe a month or two later, something else comes up? Is it possible to cover, you know, in the scope of, either the audit or separate exercise, a reconciliation of balances across governments and maybe issue a consolidated press release, that, you know, this exercise has been done and no gaps have been, you know, observed, or if any gap has been observed? That will give, you know, immense clarity to the market, not to, or, you know, kind of extrapolate this issue beyond what has come over the weekend, if that's possible. Yeah, this is a good point. This is a good point. We will evaluate this, actually. We'll think this over a little, but I think it's a good point, because, you see, the, the thing is that, the, the more we expand, the more focus will be lost. We want to be very, very clear about the focus of this. We have to get to the bottom of this. With regard to the due diligence, whether internally or externally, we will definitely do a proper due diligence on the rest of the system as well. Definitely do that. Thanks, Prakhar, it's a very good input. Perfect. Thank you so much, and best wishes to all of you. Thank you, Prakhar. Thank you. Thank you. Ladies and gentlemen, due to the time constraint, that was the last question for today. We'll like to end the con. No, no, that's fine. In, in case, I don't want to cut out anybody. If anybody else has to ask any questions, please feel free. Sure. If anyone would like to ask a question, press star and one. Our next question come from the line of Subir Sen from Aditya Birla Sun Life Insurance. Please go ahead. Thanks for the opportunity. Just wanted a small clarification. That INR 490 plus INR 100 which you mentioned, that INR 100 also pertains to Haryana government? Yes, yes. This is only one account and one check, or there are multiple checks and multiple accounts? I, I, I think these are multiple. Oh, Oh, thank you. They pertain to that branch only. They also put it INR 100 crore also. Okay. Thank you. Thank you. Our next question come from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah. Hi. Thanks for the opportunity. Just, sir, one small question. Like, this money that has gone out, INR 580 crore, like, is this all to the private banks or some PSU banks also there? Only two banks have been empanelled by the state government. Why is that so? Any color if you can share as to the mix of the outflow and this, some rationale around this panel. The money has gone to, you know, many of the banks actually in the system. Even those banks are cooperating the process. We, we've reached out to many of them, and they're all highly cooperative. With regard to the... What is the second question? The de-panelment has happened only for. Yeah, yeah, yeah. Multiple banks. That, that, we can, we can understand the, the, the, you know, from, from their point of view, from the counterparty's point of view, where, you know, that, that incident has occurred. I think it will be a natural reaction for them to, to, put up, you know, to take the action they did. I, I, I, I think that it is our responsibility, to, to, to, to do better and to, and to give the necessary assurances and, come, come back in the game. Sure, sir. Thank, thanks so much. In many occasions, you know, Nitin, you know the bank for long. We have really, you know, where we've come from, this bank, you know, we've really. I think we covered a lot of ground. We will cover ground on this front as well, and win back the confidence of that client. Sure. We, we, we hopefully understand that, and thanks for doing this call. Thank you so much. Thank you. Our next question come from the line of Deepak Gupta from JM Mutual Fund. Please go ahead. Hi. Morning, sir. I just wanted to understand, the timeline of the incident. Given the fact that the branch would have been subjected to multiple concurrent and internal audits, does it imply that this would have been a recent transaction, which is why it wasn't discovered? I mentioned that earlier, that there are certain things which are under the scope of the audit. Let the information come out as it comes out. The more the trigger was the fact that certain departments, you know, asked for balance confirmations. Then, what they assumed or they thought, you know, basically, when the books of accounts, there was a difference, and that's how we surfaced this. Really, what we have done is that apart from the apart from the INR 490 crore that came out, we have independently self-evaluated the rest of the system. We have found a gap of INR 100 crore. We have put everything together, and we want to announce to everybody one shot, so that they don't have to come back to you again and again. This is our intent at this point of time. Understand that. Sir, given the fact that, you know, that there has been wrongdoing from the government side as well, probably, and the investigation is going on, shouldn't we fight tooth and nail to get the money back or to ensure that we don't have too much of financial loss? See, the thing is that, first of all, the, it, it is a forensic audit that will establish a, a lot more of these, of, of the facts. From the facts will come, responsibilities. If, if the, the, it, it, it is, you, you could be very well be right, that, there, there could be, errors from the other party as well. There could be error from the, some, some colluding party who are the beneficiaries. If all that responsibility will be attached. Now, your question is that why should IDFC Bank foot the bill for the entire amount? If multiple parties are involved and other parties are also involved, that is something we will establish at the point of, as, as it goes. Our intention, generally as an approach, as a bank, as a management, is whatever is fair has to be done. If it's our responsibility, we'll foot, we will foot the bill. To the extent our responsibility is crystallized, definitely we'll foot the bill. We, we will not, we will not fight tooth and nail for things that we don't deserve to keep in our books or, or our P&L. Sure. Noted, sir. Thank you. Thank you. I think. Sorry. Go on, anybody else want to ask a question? Yes. Our next question come from the line of Jayant from Axis Capital. Please go ahead. Thank you for the opportunity. 1 question I wanted to ask on the, what is the size of government, state government deposits in our overall deposits, and do you see any impact? I thought Sudhanshu already answered, answered that, that. And, and also with regard, maybe you joined late, and... Sorry, you didn't finish the second part of the question? Second question was that only, sir, is that, I'm sorry if it's already answered, but do you see any impact from other state governments in north, from this case? Yeah, I think that question was already answered. We have already, I have but, but since you're coming in late, maybe I'll just quickly, in 10 seconds I'll finish, I'll answer this. That our-- We have a deep, strong relationship with everybody. Our systems are deeply integrated with these, with the systems of these governments. We pay, we collect taxes for them, we do... You know, there are multiple sets of services. We collect state taxes, central taxes, GST, and so there is just so much more we do with them. It's like deeply integrated relationship. We expect the relationship to do-- to continue to behave well with everybody else. Like I said, we are a, you know, well-rated bank. I'd like to say we are AAA CRISIL on fixed deposits and AA+ on CRISIL and long-term rating. These are very high ratings and increasing, if you see the trend. We are a good bank, good capital adequacy, you know, good balance sheet size, good culture, good systems, deep integration. We have many things going in our favor and good relationship management and people who don't litigate unnecessarily. I believe we will. Our conduct, we will demonstrate to a conduct that we, that we dealt well in this matter, and we will continue to enjoy the confidence of the people. Thank you, sir, and apologies for the repetition. Thank you. I think we, I think it's. Okay. Yeah. Can we take a last question, friends, because I think we've been at this. Sure. We'll take the last question from Siva Natarajan from Principal Asset Management. Please go ahead. Yeah. Hi, thanks. Just following up on, on an explanation you gave earlier. Is the process for authenticating and clearing a physical check at IDFC the same as other large private banks? Yes, yes, it's very much the same. In fact, we are absolutely the, on par with, with any, any good bank. This is a collusion that has happened, you know, like we discussed before. In collusion is a collusion risk. It can happen, it can happen anywhere. Of course, we will now reflect on it and see what more we can put in terms of the controls. To answer your question, yes, of course, not only the processes are the same, we do validation, the, there's eye to eye checking of the check versus the whether the system or the. You know, the process is the same. Basically, you check the signature on the instrument versus the system of system, you clear it, and then there is a double, triple check of maker, authorizer, verifier, et cetera. All that has been followed in this case. Then these are followed up with, you know, the, the, as, you know, sending a communication system-generated statement to, to the registered customer IDs, mobile alerts, SMS alerts, monthly bank statements, monthly balance confirmation certificates. All of these things go to the customer. These are the standard processes of the banking system. Thank you. With your permission, friends, can I please close this call? Moderator, can I go ahead? It's been like, it's like touching 9. We, I'd like to just, you know, conclude by, by, by, by saying one thing, that this, this incident, of course, has deeply disturbed us because it, you know, not, not because of the of anything else, because the bank has had, you know, a, a sterling record on operational excellence for the last 10 years. Like I said before, not a single smell like this in 10 years of operation and in the last 7 years post-merger as well. When that story get, gets disturbed by 1 incident, it has disturbed us. We are, we are not going to let this go in waste. We are going to get to it. If it's collusion of the key risk, then we will address collusion. If there are any other systems also, we'll address it. Maybe we'll discover, if we discover anything. That's one. Number two, we would like to point out that, that the core operations of the bank is, is very important for you to, you know, we request you to take note of. You know, this incident has disturbed you also. We feel, you know, we really regret that. It shouldn't have happened. Particularly, the magnitude of the issue is, is, is, is more, and we, that also disturbs us. Coming back to it. When you look back, I want to just share with all of you that this bank has come through, you know, from the situation we were, let me say, at the time of merger, the core operating profit of the bank is very strong. Our ability to take some of these hits today is better than ever before. You know, that is, you know, the core strength is strong. When you will look through this, hopefully, all of you will look through this for one quarter. We have not yet decided what we'll provide or not provide, but you assume, you know, that we will take some provisions for this. Please assume that. We believe that the bank, you know, because the net interest margin is expected to increase, the credit costs are expected to go down this quarter. On the standalone basis, we were expecting a very solid quarter, this Q4, in terms of profitability. We were expecting, you should see last two quarters have gone up from INR 350 crore to INR 500 crore. We were expecting a higher number this quarter. This is our normal base case expectation. Of course, despite this hit, if we were to take one, we still expect to be profitable. This is our estimates at this point of time. We believe that hopefully when you will wake up, you know, a quarter from now, you will look through this. We will not look through it, but hopefully you will look through this, and maybe from, from there on, we will emerge stronger. I want to take this opportunity of even sharing with all of our employees, that we have come through a lot to become a strong bank now and be rated what we are, and we will come out stronger from this. We will emerge stronger. We are confident about that. Thank you, sir. Ladies and gentlemen, on IDFC FIRST Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.