The proposed class action, filed in the US District Court for the Southern District of New York on August 13, accuses HDFC Bank, Managing Director and Chief Executive Sashidhar Jagdishan and Chief Financial Officer Srinivasan Vaidyanathan of misleading investors. The case covers investors who bought or acquired HDFC Bank securities between July 17, 2023 and May 26, 2026.
The complaint alleges that the payments were routed through the bank’s marketing function as sponsorships for a road-safety campaign, while effectively allowing MSRDC to earn a higher return on its deposits. It alleges that the arrangement resulted in an effective interest rate of 6.01%, including an additional 2.51 percentage points, and that HDFC Bank did not adequately disclose the arrangement and related risks to investors.
Ranina said the bank’s earlier internal investigation and clean chit could play an important role as the case progresses. The lawsuit is still at an early stage, with HDFC Bank maintaining that the claims are without merit and stating that it will defend itself.
Ranina said the central question before the US court is whether the payment was intended to conceal additional interest paid on deposits.
“The issue is whether there’s a cover-up or whether there’s misleading information under US laws. That has to be established in the US court.”
As of 10:07 am, HDFC Bank shares were trading at ₹720.20 on the NSE. The bank has a market capitalisation of ₹11.10 lakh crore, and its stock has declined by more than 24% over the past year.
He added that if HDFC Bank can demonstrate that the sponsorship payment to MSRDC was unrelated to the deposits placed with the bank, then it’s a different issue altogether.
Ranina also noted that the bank’s internal investigation, which reportedly gave it a clean chit, could work in its favour.
Abizer Diwanji, Founder, NeoStrat Advisors LLP questioned why older issues involving the bank continue to resurface despite no evidence of fraud involving depositors or shareholders.
“There is no case where a bank has been defrauded, or shareholders have been defrauded.”
He suggested that multiple historical issues are being revisited across different forums, saying it appears that everybody seems to want to capitalise on it.
According to Diwanji, while HDFC Bank has faced operational and integration challenges following its merger, linking those issues with transactions dating back to 2013 or 2016 may not be appropriate.
“I don’t know why a 2013 issue is being raised and linked to broader governance that’s happening today,” he said, adding that revisiting older matters together seems unwarranted.
Mid-sized private banks expected to raise more capital
The discussion also turned to capital raising by private sector banks after reports that DCB Bank is exploring a ₹2,000 crore fund raise.
Diwanji said raising capital is becoming necessary for mid-sized private banks to strengthen their balance sheets and improve resilience.
He pointed to investments in banks such as YES Bank, RBL Bank and Federal Bank, saying foreign investors remain interested in India’s banking sector. According to him, private equity investments generally provide growth capital before a strategic investor eventually enters.
He added that larger banks are raising debt, while mid-sized lenders need to strengthen their Tier-I capital through equity.
IDBI Bank privatisation seen as positive
Commenting on the proposed privatisation of IDBI Bank, Diwanji said he hopes the transaction receives government approval soon after facing repeated delays.
He said successful privatisation would help transform IDBI Bank into a fully private sector lender, although integrating a bank with a long public sector legacy would remain a challenge.
Diwanji added that a global investor such as Fairfax could help expand the bank’s international presence, though he declined to comment on the likely impact on the stock price, saying the market may have already priced in expectations.
For the full interview, watch the accompanying video
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