Mumbai: HDFC Bank shares fell sharply on Wednesday after a report in The Indian Express alleged the lender had internally probed payments worth ₹45 crore made to the Maharashtra State Road Development Corporation (MSRDC), which were allegedly routed as marketing expenses to effectively offer higher returns on deposits, intensifying scrutiny around governance practices at India’s largest private sector bank.
The bank’s shares closed 2.6% lower at ₹758.65 on the National Stock Exchange, to become one of the worst-performing banking stocks. The selloff also weighed on broader market sentiment, coming at a time when the bank is already facing pressure from slower stock performance, foreign investor selling and post-merger integration challenges. The Nifty Bank index was down 0.4%, while Nifty 50 was almost flat.
The report, published on Wednesday, claimed that what was not publicly disclosed earlier was that, on March 12, just six days before former chairman Atanu Chakraborty resigned, the audit committee of the board, chaired by M.D. Ranganath, had ordered a formal internal vigilance investigation into the payments made during FY24-FY25.
According to the report, the payments were allegedly structured as ‘differential interest’ linked to deposits from MSRDC. Instead of being directly booked as interest payouts, the money was said to be routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign involving local vendors.
Responding to the allegations, issued a statement defending its governance framework and internal processes. “The bank has robust internal oversight, audit and control processes and systems. All issues are dealt with in accordance with bank’s established norms, and full process is always followed before final determination post any internal review,” it said.
said it strongly rejects any assumptions of wrongdoing or culpability based on selective material. It also denied allegations of irregularities and maintained that conclusions should not be drawn from incomplete or selective disclosures.
The newspaper report also claimed that internal records reviewed during the probe pointed to discussions involving senior management, including managing director and chief executive officer Sashidhar Jagdishan.
The controversy has intensified scrutiny around governance practices at HDFC, particularly because Chakraborty’s abrupt resignation in March had referenced “certain happenings and practices within the bank” that were allegedly not in “congruence” with his personal values and ethics. Since Chakraborty resigned on 17 March, shares of the private sector bank have declined as much as 10%.
Following his resignation, had, in a late night announcement, said the Reserve Bank of India (RBI) had approved the appointment of board member and HDFC Group veteran Keki Mistry as an interim part-time chairman for three months from 19 March. A veteran within the HDFC ecosystem, Mistry’s temporary elevation was seen as a stabilizing move.
The report has also sparked broader investor concerns over governance standards in India’s banking sector, especially at a time when HDFC Bank has already been facing pressure from slower stock performance, foreign investor selling and post-merger integration challenges.
The bank’s operating performance continues to show resilience. For the quarter ended March, its loan growth rose 12% year-on-year to ₹3.17 trillion. Deposits continued to outpace credit at ₹3.91 trillion, up over 14%.
Improvement in asset quality, lower provisions and strong loan growth took the lender’s net profit to ₹19,220 crore, up over 9% year-on-year in the March quarter, higher than expectations of ₹19,053 crore profit after tax estimated by Bloomberg.