HDFC Bank Shares Decline Amid Reports of Payments Channelled to Benefit Depositor MSRDC

HDFC Bank Shares Plummet Amid Governance Scandal Allegations

Mumbai: HDFC Bank faced a significant blow 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 offer higher returns on deposits. The bank's shares closed 2.6% lower at ₹758.65 on the National Stock Exchange, making it one of the worst-performing banking stocks.

The selloff 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.

According to the report, 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 on March 12, just six days before former chairman Atanu Chakraborty resigned. The payments were allegedly structured as 'differential interest' linked to deposits from MSRDC, instead of being directly booked as interest payouts.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

HDFC Bank responded to the allegations by issuing a statement defending its governance framework and internal processes. The bank stated that it has robust internal oversight, audit, and control processes and systems, and all issues are dealt with in accordance with the bank's established norms.

Despite the controversy, HDFC 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%. The bank's net profit reached ₹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.

The report has 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. Since Chakraborty's resignation on 17 March, shares of the private sector bank have declined as much as 10%.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline