Explained: Here’s why HDFC Bank shares fell nearly 2.5% amid ‘payment irregularities’

Shares of India’s largest private lender HDFC Bank fell by nearly 2.5 per cent on Wednesday, May 27, after reports alleged irregular payment practices. This has raised concerns over the bank’s internal governance processes.

During the morning session, the banking stock came down by 2.27 per cent to ₹761.25 apiece on the BSE. At 2:30 p.m., the stock was trading at ₹759.25, marking a decline of 2.52 per cent on the exchange.

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Decoding the fall of HDFC Bank shares

Earlier, a report by The Indian Express claimed that the Audit Committee of the Board (ACB) of the bank had on March 12 ordered a formal internal vigilance investigation to look into payments worth ₹45 crore made to the Maharashtra State Road Development Corporation (MSRDC) during FY2024 as well as FY2025.

Citing sources and documents, the report claimed that the bank paid the amount to the road development corporation of Maharashtra to draw large deposits, even when regulations do not allow lenders to ​pay varied interest rates to depositors, according to Reuters.

Further, it was alleged that these payments were linked to differential interest offered on deposits, which were maintained by MSRDC with the bank.

The report highlights that these funds were routed through HDC Bank’s marketing department, showing them as contributions towards a road safety awareness campaign via four local vendors, rather than being directly credited to the state agency as interest payments.

The arrangement was said to have been discussed at the senior management levels in the presence of HDFC Bank MD and CEO Sashidhar Jagdishan.

The developments have also been linked to the resignation of HDFC Bank’s non-executive chairman Atanu Chakraborty on March 18. At that time, Chakraborty stepped down from his position citing differences over values and ethics. However, the management later claimed that it was not informed about any specific concerns despite repeated requests.

After his resignation, HDFC Group veteran Keki Mistry was named as the interim chairman and maintained that the bank’s governance and operations remained stable.

In March, the Reserve Bank of India (RBI) had said that there were no material concerns regarding HDFC Bank’s governance or conduct, IANS reported.

What HDFC Bank said?

An HDFC Bank spokesperson has denied any assumptions of wrongdoing, besides stating that the bank has robust internal oversight, audit and control processes and systems.

“All issues are dealt with in accordance with established norms, and ​full process is always followed before final determination post any internal review,” the spokesperson told Reuters.

The official added, “We strongly ​reject any assumptions of wrongdoing or culpability based on selective material.”