Shares of AU Small Finance Bank and IDFC First Bank are under significant pressure following an immediate de-empanelment by the Haryana Government. The decision, effective February 18, 2026, bars both lenders from handling state government business, including deposits, investments, and transactions. The state’s Finance Department has directed all departments, boards, and PSUs to transfer existing balances and close accounts with both banks. A full reconciliation of accounts must be completed by March 31, 2026, with a compliance report due by early April. IDFC First Bank: Fraud Disclosure The action was triggered after IDFC First Bank reported a suspected fraud of 590 crore at its Chandigarh branch. The discrepancy was discovered during a routine request by a Haryana government department to close an account and transfer funds. Preliminary reviews suggest the fraud involved unauthorized activities by specific employees and external individuals. The bank has already suspended four officials and is commissioning an independent forensic audit. The lender maintains that the issue is confined to a specific group of government-linked accounts and does not affect the broader customer base of the branch. AU Small Finance Bank: Clarification and Impact AU Small Finance Bank has clarified that it has found no evidence of fraudulent activity on its part. The bank stated that a government account maintained with it received 47 crore from another private bank that had disclosed fraud. These funds were later transferred out through 14 transactions which the bank claims were duly authorized by the department. The bank’s exposure to Haryana government deposits stood at 735 crore as of February 17. Following the de-empanelment, these deposits dropped to 538 crore by February 21, representing approximately 0.4% of the bank's total deposit base. AU Small Finance has placed certain employees off-duty to ensure a transparent internal review and is actively seeking re-empanelment. Market Performance Despite the regulatory setback, AU Small Finance Bank shares showed resilience, closing at 1,028.75 on February 20, up 1.2% for the session. The stock remains a top performer in the Nifty Bank index over the past year, currently trading well above its 200-day moving average of 838. Analysts are closely monitoring the situation as the Haryana government has also flagged broader concerns. The state noted that several banks have failed to adhere to fixed deposit instructions, allegedly keeping funds in low-interest savings accounts instead of higher-yield flexible instruments, causing financial losses to the exchequer.