The HDFC Bank also issued formal warning letters to the three top executives besides levying penalties for what the bank termed “business overreach,” according to the company statement.
The HDFC Bank informed the stock exchanges on Monday in a regulatory filing that it fined its Managing Director and CEO Sashidhar Jagdishan, Chief Financial Officer (CFO) Srinivasan Vaidyanathan, and Group Head of Retail Assets Arvind Vohra Rs 1 lakh each, after the Board concluded an internal review into transactions linked to the Maharashtra State Road Development Corporation (MSRDC).
The HDFC Bank also issued formal warning letters to the three top executives besides levying penalties for what the bank termed “business overreach,” according to the company statement.
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Maharashtra State Road Development Corporation (MSRDC) is a Maharashtra state government-owned institution that constructs roads and other related infrastructure.
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The MSRDC matter attracted considerable attention even outside India, with multiple US law firms announcing investigations into whether the lender’s disclosures regarding the alleged payments complied with US federal securities laws, especially because HDFC Bank’s American Depositary Receipts (ADRs) trade on US stock exchanges.
Allegedly, these payments were made to compensate MSRDC with higher returns on its deposits, raising concerns about whether such transactions violated RBI banking regulations and accounting norms.
The disciplinary action followed an internal HDFC Bank board probe that determined the executives’ conduct in the MSRDC matter crossed the line into “business overreach,” according to the regulatory disclosure to the stock exchanges.
An internal probe by the HDFC Bank Board followed allegations that the three top HDFC Bank executives allegedly paid approximately Rs 45 crore to MSRDC through its marketing department under the guise of a road safety awareness campaign.
The MSRDC issue gained prominence after former HDFC Chairman Atanu Chakraborty resigned suddenly earlier this year, citing “ethical concerns.”
After Chakraborty’s exit, HDFC Bank commissioned an independent legal review, but the probe found no evidence of any breach of RBI banking norms at that time.
Yet, the HDFC Board continued to examine MSRDC-related transactions through another internal review and some violations of norms came to light.
However, the HDFC Bank Board stopped short of attributing fraud or personal misconduct to the penalised senior executives.
The HDFC Board also stated that the three executives had no mala fide intent or personal gain.
Instead, the HDFC Board characterised the MSRDC issue as “business overreach,” while acknowledging that aspects of the arrangement may not have fully aligned with RBI directions governing such transactions.
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