HDFC Bank shares slide after report on internal probe into MSRDC payments

Shares of HDFC Bank fell nearly two per cent on Wednesday following a report that the lender had conducted an internal vigilance investigation into Rs 45 crore worth of payments linked to the Maharashtra State Road Development Corporation (MSRDC).

The bank’s shares were trading at Rs 763.80 on the NSE during early trade, down Rs 15.10 or 1.94 per cent.

According to a report published by The Indian Express, the internal probe examined so-called “differential interest” payments made to MSRDC and reportedly identified accountability among several senior executives, including Managing Director and Chief Executive Officer Sashidhar Jagdishan.

The investigation was said to have been initiated shortly before former chairman Atanu Chakraborty resigned from the bank on 18 March. In his resignation, Chakraborty reportedly referred to “certain happenings and practices within the bank” that he said were not aligned with his personal values and ethics.

The Indian Express report mentioned that HDFC Bank’s Audit Committee ordered the investigation on 12 March after an internal audit of the bank’s marketing department flagged the transactions and rated the department’s functioning as “unsatisfactory”.

The payments in question were allegedly structured as “differential interest” on deposits maintained by MSRDC. Instead of being directly classified as interest payouts, the funds were reportedly routed through the bank’s marketing department and recorded as spending on a road safety awareness campaign involving four local vendors.

According to internal records reviewed by the newspaper, Jagdishan was allegedly present during discussions in which a higher payout to MSRDC was verbally agreed upon.

The report further claimed that several bank officials told investigators the CEO had participated in calls discussing ways to compensate MSRDC and had been involved in the decision to route the payments through the marketing budget as a one-time arrangement.

The newspaper also reported that HDFC Bank’s chief marketing officer Ravi Santhanam admitted during the inquiry that the marketing department had acted as a “facilitator” to disguise the reimbursement of differential interest as marketing expenditure.

The vigilance report was subsequently submitted to the Audit Committee on 10 April and later presented to the Nomination and Remuneration Committee, according to the report.

HDFC Bank has not publicly commented on the findings mentioned in the report.