Shares of HDFC Bank, India’s leading private lender, fell over 2 per cent to an intraday low of Rs 761.25 during the early trade on Wednesday, May 27, following a local newspaper report alleging that the private lender’s Audit Committee had ordered a formal “Internal Vigilance Investigation” into payments totalling Rs 45 crore to a PSU disguised as marketing spend, raising concerns around the bank’s internal governance processes.
HDFC Share Price Falling: Reason behind the decline
The investigation report by The Indian Express, further claimed that the payments were allegedly linked to differential interest offered on deposits maintained by MSRDC with the bank.
However, instead of being directly credited to the state agency as interest payments, the funds were allegedly routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign through four local vendors, according to the report.
In addition, the news report alleged that the arrangement was discussed at senior management levels in the presence of HDFC Bank MD and CEO Sashidhar Jagdishan.
The report also linked the developments to the abrupt resignation of HDFC Bank’s non-executive chairman Atanu Chakraborty on March 18. While stepping down,
He had stepped down citing differences over values and ethics, though the bank management later said it was not informed of any specific concerns despite repeated requests. While stepping down, Chakraborty had not made specific allegations, but he had said that practices at the bank were not in line with his “personal” values and ethics.
However, HDFC Bank has not issued any clarification to the exchanges regarding the report at the time of writing.
The report also stated that both the bank and the RBI did not respond to detailed queries sent by the newspaper before publication.
Following his resignation, HDFC Group veteran Keki Mistry was appointed interim chairman and maintained that the bank’s governance and operations remained stable.
Shares of HDFC Bank have fallen 9.5 per cent since March 19, when Atanu Chakraborty abruptly resigned as the lender’s part-time chairman, raising questions about governance practices.
Legal firms appointed by HDFC Bank to review the claims have yet to find material lapses in processes followed by the bank, Reuters reported earlier this month.
The outcome of the legal review is awaited.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience consult their financial advisors before making any money-related decisions.)
