HDFC Bank on Wednesday denied any wrongdoing after reports claimed that the bank “camouflaged” Rs 45 crore as marketing expenses in order to pay higher interest to Maharashtra State Road Development Corporation.
“We strongly reject any assumptions of wrongdoing or culpability based on selective material. All issues are dealt with in accordance with established norms, and the full process is always followed before final determination after any internal review,” an HDFC Bank spokesperson was quoted as saying by The Economic Times.
Despite the clarification, the stock of India’s largest private sector bank continued to trade in the red on Wednesday.
The stock declined by as much as 2.7 percent during the day.
The stock fell after an investigative report by The Indian Express newspaper stated that the bank’s audit committee had ordered a formal internal vigilance investigation into payments of Rs 45 crore to the Maharashtra State Road Development Corporation (MSRDC) as marketing expenses.
According to the report, the payments were made days before the bank’s former chairman, Atanu Chakraborty, resigned on March 18 citing ethical concerns.
Based on the bank’s internal records, The Indian Express reported that HDFC Bank had approached MSRDC in 2021 to deposit its savings with the bank.
The bank initially offered an interest rate of 3.5 percent, which did not convince Maharashtra’s infrastructure agency.
The bank then offered an interest rate of 6.01 percent, and its asset liability committee approved a special savings bank interest rate of 4.5 percent.
While the bank was expecting deposits of around Rs 10,000 crore from MSRDC, the agency deposited only Rs 200 crore in the initial months.
As a result, the 4.5 percent interest window was closed after two months in April 2022.
According to the report, this created a problem because the bank had committed an interest rate of 6.01 percent but could no longer pay even 4.5 percent.
The difference between the regular customer interest rate of 3.5 percent and the promised 6.01 percent to MSRDC — a gap of 2.51 percentage points — was allegedly paid through the marketing department.
The bank reportedly paid around Rs 45 crore as sponsorship payments to MSRDC to cover the difference in interest. According to the report, the vigilance report highlighted the role of MD and CEO Sashidhar Jagdishan, and CMO Srinivasan Vaidyanathan in the case. However, the bank has now denied any wrongdoing in the matter.
