Suspected swindle of public funds: Months before ₹590-cr fraud alert, Haryana finance dept warned of bank account deviations

July 2025 directive was issued after the finance department detected deviations in the operation of bank accounts and management of fixed deposits, raising concerns over discretionary handling of bank accounts and fixed deposits which can weaken transparency and institutional control over public funds.

Even as the IDFC First Bank which on February 21 disclosed detecting suspected fraudulent transactions amounting to ₹590 crore involving Haryana government accounts, and state’s law enforcement agencies initiated investigations into the alleged swindling of public funds, the state finance department in a 2025 compliance directive had asked departments and public sector enterprises to conduct an internal audit of their bank accounts and fixed deposits.

Even as the IDFC First Bank which on February 21 disclosed detecting suspected fraudulent transactions amounting to ₹590 crore involving Haryana government accounts, the state finance department in a 2025 compliance directive had asked departments and public sector enterprises to conduct an internal audit of their bank accounts and fixed deposits. (Shutterstock/ Representational image)

The July 2025 directive was issued after the finance department (FD) detected deviations in the operation of bank accounts and management of fixed deposits, raising concerns over discretionary handling of bank accounts and fixed deposits which can weaken transparency and institutional control over public funds.

Citing violations of guidelines regarding the operation of bank accounts and management of fixed deposits, the finance department said key deviations included opening accounts without adhering to prescribed proximity norms, selection of banks and branches based on personal preferences, and indications of favouritism in the placement of fixed deposits.

The finance department specifically took note of several Haryana government establishments located in Panchkula opening bank accounts in Chandigarh without valid justification, terming the practice contrary to laid-down instructions. It said such actions compromise financial discipline, transparency and fairness in the management of public funds. The FD had asked the departments and PSEs to examine whether accounts have been opened in accordance with the FD guidelines, whether necessary approvals were obtained and whether any corrective action was needed.

“In cases where corrective measures are found necessary, the same must be carried out within the 15 days, and a detailed compliance report must be submitted to the finance department by July 30, 2025,’’ said the July 7, 2025, communication.

The FD also made it clear that it will also conduct its own audit to assess the extent of deviations and will fix responsibility in cases of non-compliance.

Depts told in 2016 not to park govt funds in banks, policy changed later

Almost a decade ago before fresh concerns surfaced over handling of government linked bank accounts, the finance department had issued policy directions on April 4, 2016, stating that government money must remain within the state’s treasury framework and not be parked in commercial bank accounts outside official oversight. Finance officials said that the objective was to insulate public funds from fragmented control and ensure treasury oversight.

FD’s April 2016 directive drew strength from Article 284 of the Constitution (custody of suitors’ deposits and other moneys received by public servants and courts) which mandated that moneys received by or deposited with government officials, other than revenues or public moneys raised or received by the Union government or state government shall be paid into the public account of India or the public account of state.

The FD also said that personal ledger accounts (PLA)_ which are special banking accounts kept and operated in treasuries and should be opened for handling departmental funds in lieu of savings and current bank accounts. It cited weak monitoring of funds parked in commercial banks, risks of unauthorised withdrawals by drawing and disbursing officers, possibilities of misuse or embezzlement to support the PLA compliance directive.

In March 2018, the state government empanelled 27 banks to transact government business in Haryana and issued a set of guidelines like not parking more than ₹50 crore by a department in banks (other than small finance banks) which have been empanelled for the first time and parking not more than ₹25 crore by a department in small finance banks.

In support of the new policy, the state government cited the changing scenario of the banking sector so as to obtain optimum benefit of the schemes, minimise cost and bring uniformity and transparency in dealing with financial institutions by the organisations.