“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,” HDFC Bank spokesperson said.
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The clarification comes after a publication report stated that the lender’s had ordered a formal “Internal Vigilance Investigation” into payments totalling Rs 45 crore to a PSU disguised as marketing spend.
This order came after an internal audit of the bank’s marketing department, covering FY25, which had flagged these payments and rated the department’s performance as “unsatisfactory.”
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The report mentioned that the payments were allegedly made to the Maharashtra State Road Development Corporation (MSRDC), a state government agency, just days before former chairman resigned on March 18.
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The Indian Express carried out an investigation into the internal records of India’s leading private lender, revealing that the payments were intended for Maharashtra State Road Development Corporation as “differential interest”, or interest paid above the specified rate on its deposits. However, the funds were allegedly routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign via four local vendors, instead of being directly credited to MSRDC’s account as interest income.
ET could not independently verify the report.
The investigated records revealed that the payout was approved in the presence of HDFC Bank MD & CEO Sashidhar Jagdishan during senior-level discussions where a higher rate for MSRDC was “verbally” agreed upon.
Jagdishan’s participation in the call has been testified by many officials in the internal probe saying that he “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.”
According to the report, HDFC Bank Chief Marketing Officer Ravi Santhanam also acknowledged in his testimony during the Vigilance probe that the marketing department acted as a “facilitator to camouflage differential interest reimbursement as marketing spend”.
Regulatory violations
The Indian Express vigilance report identified several serious regulatory and governance breaches.
It flagged a violation of the Master Directions on interest rates on deposits of the Reserve Bank of India, which explicitly prohibit banks from offering negotiated returns to individual depositors. By routing the differential interest to MSRDC through vendor payments and effectively compensating a customer at a rate unavailable to others, the HDFC Bank is alleged to have done what the regulation forbids.
The report flagged another violation of the bank’s own anti-bribery and anti-corruption policy. The policy prohibits payments that could constitute “improper inducement”. Routing interest payments through vendors in the form of marketing expenses, the report said, falls squarely within that prohibition.
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