IDFC First Bank Fraud: Which Mutual Funds Have the Highest Exposure?

A recent fraud case at a single branch of IDFC First Bank has caused significant concern in the market. Following the news, the bank's stock price fell by around 20% on Monday.

For mutual fund investors, it is important to know which funds hold shares of IDFC First Bank. Here is a simple breakdown of the situation and the exposure of various Asset Management Companies (AMCs).

What Happened at IDFC First Bank?

On February 18, 2026, discrepancies were found in certain accounts linked to the Haryana state government at the bank's Chandigarh branch.

• The actual account balances did not match the amounts claimed by the account holders.
• The fraud is estimated to be around ₹590 crore, which is more than the bank's entire quarterly profit.
• The bank has suspended four suspected officials, filed a police complaint, and appointed KPMG to conduct a forensic audit.
• The Haryana government has removed IDFC First Bank from its list of approved banks and directed state departments to close their accounts with the bank.

Which Mutual Funds Hold IDFC First Bank Shares?

These are the 5 Mutual Fund Schemes that have the highest exposure in IDFC Bank:

What Mutual Fund Investors Need to Know

For mutual fund investors, the key concern is not just the fraud itself, but how it impacts fund portfolios that hold IDFC First Bank shares.

First, understand the actual NAV impact.
On February 23, 2026, IDFC First Bank closed nearly 16% lower after hitting the lower circuit intraday. Mutual fund NAVs are calculated based on closing prices, not intraday lows.

Even in the schemes with the highest exposure (around 5% weight), the one-day impact on NAV would be roughly:

5% portfolio weight × 16% stock fall ≈ 0.8% impact on overall NAV

This means that while the stock saw a sharp correction, the direct impact at the mutual fund level is significantly lower due to diversification.

Second, the impact differs by fund category.

• Focused and thematic funds (like sectoral or financial services funds) may see relatively higher short-term volatility because of concentrated exposure.
• Large & mid cap diversified funds may experience a milder impact due to a broader portfolio spread.
• In the case of financial services index funds, the effect could be amplified if other banking stocks in the index also face pressure.

What Investors Should Track

Although the fraud at IDFC First Bank has raised concerns, mutual fund investors do not need to track every development like a direct stock investor. The responsibility of monitoring stock-specific risks lies with the fund manager. However, investors should keep an eye on a few broader indicators to ensure their fund remains on track. Here Are the Key Things Mutual Fund Investors Should Track:

• The fund's overall performance relative to its benchmark and peer funds in the coming months. If the impact of IDFC First Bank remains limited, performance should not significantly deviate.
• Monthly portfolio disclosures to check whether the fund manager is reducing, maintaining, or increasing exposure to the bank.
• Any commentary from the fund house explaining their stance on IDFC First Bank and how they are managing the risk.
• The level of concentration in the portfolio, especially in focused or financial sector funds, where exposure to one stock can be higher.
• Whether the fund still aligns with your long term asset allocation and risk appetite, despite short term volatility.

Conclusion

The fraud incident has led to a sharp decline in IDFC First Bank's stock price and raised concerns about its internal controls. While the bank is taking corrective measures, its removal from the Haryana government's approved list signals a potential loss of institutional business. Investors in the mutual funds listed above may see some short-term impact on their portfolio returns due to the fall in the bank's share price.

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