HDFC Bank has categorically denied any wrongdoing after media reports alleged that payments worth around ₹45 crore were routed through its marketing department to a Maharashtra government-linked agency. According to reports from GoodReturns, the bank maintained that all transactions followed established internal processes and that regulatory authorities had not flagged any material concerns so far. In an official clarification, HDFC Bank emphasised the strength of its governance and compliance systems, stating that it follows strict oversight mechanisms, including audit and internal control frameworks, to ensure that all financial decisions are properly reviewed and approved. "We strongly reject any assumptions of wrongdoing or culpability based on selective material. All issues are dealt with in accordance with established norms, and full process is always followed before final determination post any internal review," an HDFC Bank spokesperson said. However, Business Standard editorial commentary notes that the bank's statement did not adequately address stakeholder concerns and failed to provide categorical clarification on whether the report was correct and whether regulatory norms were violated.
The controversy emerged following reports suggesting that an internal vigilance review had been initiated after the bank's Audit Committee of the Board (ACB) ordered a formal investigation into payments worth ₹45 crore made to the Maharashtra State Road Development Corporation (MSRDC) during FY2024 and FY2025. As reported by GoodReturns, the marketing division was scrutinized after expenses totalling ₹45 crore were flagged during internal checks. The payments were allegedly linked to differential interest offered on deposits maintained by MSRDC with the bank, with funds allegedly routed through the bank's marketing department and shown as contributions towards a road safety awareness campaign through four local vendors. The bank stated that it has robust internal oversight, audit and control processes and systems, with all issues dealt with in accordance with established norms and full process followed before final determination post any internal review.
The reported incident raises significant regulatory compliance questions, as regulations do not allow banks to negotiate interest rates with depositors. The Reserve Bank of India's master direction on interest rates on deposits states that commercial banks must maintain interest-rate cards for bulk deposits, and they cannot be negotiated between the depositor and the bank. Business Standard editorial commentary emphasizes that the situation warrants a categorical clarification on whether the report was correct and whether the lender had violated any regulatory norms. The controversy is particularly concerning given that in March, the bank's part-time chairman and independent director Atanu Chakraborty had resigned, stating that certain practices at the bank were not aligned with his values and ethical standards. A few days after his resignation, the bank asked some of its executives to leave over misselling concerns, though it remains unclear what exactly Mr Chakraborty's concerns were. The editorial notes that weakness in even a single bank can pose systemic risks to the broader financial system, making it vital for banks to maintain trust and address governance issues transparently.
Following the reports, shares of HDFC Bank declined by nearly 2.54%, with the stock falling ₹18.75 or 2.41% to trade at ₹760.15 during intraday trade on Wednesday at approximately 2:11 pm. According to GoodReturns, the stock came under pressure as investors reacted to the allegations, even as the lender firmly rejected any suggestion of misconduct. The report had also linked the matter to the resignation of former non-executive chairman Atanu Chakraborty on March 18, who had stepped down citing differences over values and ethics, though the bank management stated it was not informed of any specific concerns despite repeated requests. Keki Mistry was appointed interim chairman and had maintained that the bank's governance and operations remained stable. However, Business Standard editorial commentary suggests that the bank must address all related issues, noting that it is vital to recognise that banking is not an ordinary business built on trust, and that concerns over governance issues can affect stakeholder confidence.
