NDB appoints Deloitte India for forensic probe into fraud

NDB Bank yesterday revealed it has appointed Deloitte Touche Tohmatsu India LLP to carry out an independent forensic review into the recently uncovered fraudulent transactions, escalating its response as regulatory scrutiny intensifies following one of the most significant internal fraud incidents reported in Sri Lanka’s banking sector.

The bank said the review will be conducted in consultation with the Central Bank of Sri Lanka (CBSL), and in line with recommendations from the Director of Bank Supervision. The probe will focus specifically on the fraudulent transactions, examining potential lapses in internal controls, oversight and governance during the relevant period. Findings, including interim updates, will be submitted directly to the regulator.

The move follows earlier disclosures this month, where NDB revealed that what was initially flagged as a Rs. 380 million internal fraud had widened substantially upon further investigation, with gross exposures estimated at around Rs. 13.2 billion. The bank indicated it will take a prudent provisioning approach, warning of an after-tax impact of roughly Rs. 4 billion in the March 2026 quarter under a worst-case scenario.

The Central Bank affirmed that no customer deposits or accounts were affected and that NDB continues to maintain capital and liquidity levels above minimum regulatory thresholds. The financial sector regulator also indicated readiness to extend liquidity support if required, underscoring efforts to ring-fence the issue within the institution.

However, the episode has already begun to weigh on the bank’s financial and reputational standing. Fitch Ratings recently downgraded NDB’s National Long-Term Rating, citing heightened risks to capitalisation and profitability stemming from the fraud, alongside identified weaknesses in internal controls.

Early investigative findings highlighted potential operational vulnerabilities, including the use of multiple high-value electronic fund transfers over weekends, raising questions around monitoring frameworks and transaction controls. The sharp increase in certain balance sheet line items, particularly “other financial assets,” in recent financial statements has also drawn market attention.