ED steps in to probe FD fraud linked to Kotak Mahindra Bank; shares edge lower

The Enforcement Directorate has registered a case in connection with an alleged fraud involving fixed deposits in Chandigarh and Panchkula.

ED steps in

According to information accessed by the agency reported by Zee Business, the alleged irregularities involve routing government fixed deposits to private entities in the form of loans at higher interest rates. This activity is believed to have been ongoing for a long period.

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Multiple cases have been flagged where such loans were extended against fixed deposits. While some repayments were made on time, a large number of loans reportedly turned into defaults. This ultimately led to the detection of the fraud.

Zee Business reported that sources indicate that similar patterns could be present across other financial institutions as well, raising broader concerns.

Rs 150–160 crore Panchkula-linked scam

A major part of the case relates to an alleged Rs 150–160 crore fraud involving the Panchkula Municipal Corporation in Haryana.

The case includes the use of fake fixed deposit receipts, forged documents, and suspected forged signatures to divert funds. Authorities are probing possible collusion between external entities and certain individuals.

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A formal complaint has been filed with the Panchkula Police. One accused, Dileep Raghav, has already been arrested.

Bank reassures investors

Kotak Mahindra Bank has earlier said the issue does not have any material financial impact at present.

In its exchange filing, the bank stated that the matter is being reviewed based on inputs from the Panchkula Municipal Corporation. It also noted that a “significant portion” of the funds has already been reconciled.

This indicates that some deposits may not be missing but were not properly accounted for earlier.

The development follows a similar fraud case at IDFC First Bank, which had raised concerns around the safety of large institutional deposits.

The latest case could lead to tighter scrutiny of processes around fixed deposits and lending practices across banks.

Subsidiary developments

Separately, Kotak Mahindra Bank’s subsidiary, Kotak Mahindra Prime Limited, has approved the appointment of Suraj Rajappan as Managing Director and CEO for a three-year term starting June 1, 2026. He will replace Shahrukh Todiwala, who retires at the end of May.

The subsidiary’s board has also approved an increase in its borrowing limit from Rs 43,000 crore to Rs 48,000 crore. The higher limit will support funding through loans, debentures and other instruments.

Stock impact

Shares of Kotak Mahindra Bank remained under mild pressure in Tuesday’s trade. At around 10:30 am, the stock was trading at Rs 359.45, down Rs 1.10 or 0.31 per cent for the day. The stock opened at Rs 357.00 and moved in a range of Rs 357.00 to Rs 362.15 during the session, with a market capitalisation of around Rs 3.58 lakh crore. The stock still below its 52-week high of Rs 460.38 and closer to its 52-week low of Rs 345.50.