NDB appoints Deloitte India for forensic probe as the bank intensifies its response to a major internal fraud incident, drawing heightened regulatory scrutiny across Sri Lanka’s banking sector.
NDB appoints Deloitte India for forensic probe amid fraud escalation
NDB Bank yesterday announced that it has engaged Deloitte Touche Tohmatsu India LLP to conduct an independent forensic review into recently uncovered fraudulent transactions, marking a significant escalation in its internal investigation process.
The bank stated that the forensic probe will be carried out in close consultation with the Central Bank of Sri Lanka (CBSL), aligning with directives issued by the Director of Bank Supervision. The scope of the review will focus specifically on the fraudulent activities, with a detailed examination of potential weaknesses in internal controls, governance frameworks, and oversight mechanisms during the relevant period. Interim findings and final reports are expected to be submitted directly to the regulator.
The latest development follows earlier disclosures this month, when NDB revealed that what was initially identified as an internal fraud amounting to Rs. 380 million had significantly expanded upon further investigation. The bank now estimates gross exposure linked to the incident at approximately Rs. 13.2 billion, making it one of the most substantial fraud cases reported within Sri Lanka’s banking industry in recent years.
In response, NDB has indicated that it will adopt a prudent provisioning strategy. Under a worst-case scenario, the bank expects an after-tax financial impact of around Rs. 4 billion for the March 2026 quarter. This approach reflects an effort to contain financial risks while maintaining transparency with regulators and investors.
Regulatory authorities have moved swiftly to reassure the market. The Central Bank confirmed that no customer deposits or individual accounts have been affected by the fraudulent transactions. It further noted that NDB continues to operate with capital adequacy and liquidity ratios above the minimum regulatory requirements. The regulator also signaled its readiness to provide liquidity support if necessary, highlighting a broader effort to isolate the issue within the institution and prevent systemic repercussions.
Despite these assurances, the incident has already begun to exert pressure on the bank’s financial standing and market perception. Fitch Ratings recently downgraded NDB’s National Long-Term Rating, citing increased risks to capitalisation and profitability arising from the fraud. The rating agency also pointed to identified deficiencies in internal controls, reinforcing concerns about governance standards within the institution.
Preliminary investigative insights have revealed potential operational vulnerabilities that may have facilitated the fraudulent activity. Among the key concerns is the use of multiple high-value electronic fund transfers executed during weekends, a pattern that has raised questions regarding the robustness of transaction monitoring systems and real-time oversight capabilities. Such anomalies suggest possible gaps in automated controls and escalation protocols.
Additionally, analysts and market observers have flagged unusual movements in certain balance sheet components. In particular, a notable increase in “other financial assets” reported in recent financial statements has drawn scrutiny, prompting further questions about underlying asset quality and reporting transparency.
The decision to appoint an external forensic auditor signals a critical step toward restoring confidence among stakeholders, including regulators, investors, and customers. Independent reviews of this nature are typically aimed at establishing accountability, identifying systemic weaknesses, and recommending corrective measures to prevent recurrence.
For the broader banking sector, the incident underscores the importance of strengthening risk management frameworks, particularly in areas such as digital transaction monitoring, internal audit functions, and governance oversight. As financial institutions increasingly rely on digital channels, the need for robust safeguards against internal and external threats has become more pronounced.
While the full extent of the findings from Deloitte India’s forensic probe remains to be seen, the outcome is expected to play a pivotal role in shaping NDB’s recovery strategy and regulatory response. In the interim, the bank’s focus is likely to remain on stabilising its financial position, reinforcing internal controls, and maintaining stakeholder confidence amid a challenging operating environment.