Mumbai: HDFC Bank Ltd, India’s largest private lender, has been sued in the US by investors who allege that the bank violated American securities laws, causing them losses, and are seeking compensation.
The lawsuit escalates a controversy that had until now involved investigations by multiple US law firms into the bank’s disclosures and governance practices.
Jwalant Natvarlal Soneji, an HDFC Bank investor, filed a securities fraud class-action complaint on 13 August in the US District Court for the Southern District of New York against the lender.
The complaint seeks to represent investors who purchased or acquired HDFC securities between 17 July 2023 and 26 May 2026.
In the lawsuit, the plaintiff has alleged that HDFC Bank made materially false or misleading statements and failed to disclose adverse information about its business, operations and prospects.
The latest complaint centres on allegations that HDFC Bank disguised payments made to the Maharashtra State Road Development Corporation (MSRDC) as marketing expenses in order to compensate the state agency for interest above the rate available to other depositors.
The court has since issued a summons to the bank in the civil action suit. The summons, filed on 14 August, said that a lawsuit has been filed against the defendants and requires a response within 21 days after service, either through an answer to the complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure.
Mint has seen a copy of the petition and the summons issued. The law firm that filed the petition is Glancy Prongay Wolke & Rotter Llp.
A spokesperson for HDFC Bank said that in the US, these types of shareholder lawsuits are incredibly common after a company experiences a stock drop, and many companies listed in the US routinely defend these lawsuits each year.
“The bank believes the lawsuit is without merit and intends to vigorously defend itself,” the spokesperson said.
The complaint follows by three US law firms including Glancy Prongay & Rotter Llp, the Law Offices of Frank R Cruz and the Law Offices of Howard G Smith into whether HDFC Bank violated US federal securities laws. The three firms had separately announced investigations into whether the lender had made misleading disclosures or failed to disclose information material to investors.
Mint had that the probes followed allegations surrounding the bank’s internal investigation into irregular payments and broader governance concerns. The latest lawsuit marks a significant escalation because the issue has now moved from preliminary investigations by plaintiffs’ law firms to formal litigation in a US court.
Investors covered by the proposed class have 60 days from the date of the notice to seek appointment as lead plaintiff, according to Business Wire. The complaint itself, however, represents allegations by the plaintiff and does not constitute a finding by the court that HDFC Bank or its executives violated US securities laws.
According to the complaint, the bank allegedly paid about ₹45 crore to MSRDC and offered it an effective interest rate of 6.01%, or 2.51 percentage points above the rate offered on other savings accounts.
The complaint relies heavily on a 27 May report by The Indian Express, which alleged that an internal vigilance investigation had found regulatory and governance breaches relating to the payments.
It had said that the differential interest was routed through HDFC Bank’s marketing department and disguised as sponsorship payments for an MSRDC road safety campaign.
The complaint alleged that more than 10 senior officials were found responsible by the internal probe, including Jagdishan.
The filing also cites former chairman Atanu Chakraborty’s resignation in March. , Chakraborty said that “certain happenings and practices within the bank” he had observed over the previous two years were “not in congruence with my personal values and ethics.”
HDFC’s American depositary shares (ADS) fell 7.28% on 18 March following the disclosure, according to the complaint.
The class-action lawsuit also alleged that the bank failed to disclose that the payments had been camouflaged as marketing expenditure and that the activities were approved by senior management and that they likely violated regulations and the company’s own policies, including those prohibiting payments that could constitute improper inducement.
It further alleged that the conduct resulted in HDFC Bank overstating interest income and operating expenses and that its positive statements to investors were, therefore, misleading.
According to the complaint, HDFC’s ADS fell 4.1% on 27 May, closing at $23.78, after The Indian Express report was published. The complaint alleges that investors suffered losses as a result of the alleged wrongful conduct and the decline in the value of HDFC securities.
The plaintiff is seeking compensatory damages for the proposed class, with the amount to be determined at trial, besides interest, legal and expert costs and other relief. The complaint also demands a jury trial.
HDFC Bank had previously rejected suggestions of wrongdoing after the allegations emerged. Following Chakraborty’s resignation, the bank also commissioned an independent legal review by US law firm Wilson Sonsini Goodrich & Rosati and Indian law firm Wadia Ghandy & Co. The review concluded there was no evidence to substantiate Chakraborty’s allegations.