HDFC Bank declined more than 2% on Wednesday following a media report alleging that the lender conducted an internal vigilance investigation into interest payments worth ₹45 crore made to a state firm. HDFC Bank shares fell as much as 2.27% to ₹761.25 apiece on the BSE.
According to a report by The Indian Express dated May 27, an internal vigilance probe at examined “differential interest” payments amounting to ₹45 crore made to the Maharashtra State Road Development Corporation (MSRDC).
The report said the investigation was initiated shortly before former chairman stepped down on March 18.
As per The Indian Express report, HDFC Bank’s Audit Committee of the Board ordered the probe on March 12 after an internal audit of the bank’s marketing department flagged the transactions and rated the department’s functioning as “unsatisfactory”.
The report further alleged that the payments were structured as “differential interest” on MSRDC deposits. Instead of being directly credited as interest payments, the funds were allegedly routed through the bank’s marketing department and recorded as contributions toward a road safety awareness campaign via four local vendors.
Internal records reviewed by The Indian Express reportedly indicated that HDFC Bank’s Managing Director and CEO Sashidhar Jagdishan was present during discussions in which a higher payout to MSRDC was “verbally” agreed upon.
Citing officials familiar with the investigation, the report said Jagdishan “participated in the call convened to examine how the bank could compensate MSRDC and was part of the decision to provide the differential interest through the marketing budget as a one-off arrangement.”
The Indian Express further reported that HDFC Bank Chief Marketing Officer Ravi Santhanam admitted during the internal probe that the bank’s marketing department had acted as a “facilitator to camouflage differential interest reimbursement as marketing spend.”
According to the report, the vigilance findings were subsequently submitted to HDFC Bank’s Audit Committee of the Board on April 10, followed by a presentation to the Nomination and Remuneration Committee a week later.
HDFC Bank Share Price Performance
HDFC Bank share price has risen 3% in three months and has gained 11% on a year-to-date (YTD) basis. The stock has rallied 20% in two years and has surged 41% over the past five years.
At 10:15 AM, HDFC Bank share price was trading 1.90% lower at ₹764.20 apiece on the .