HDFC Bank shares fall 2% on reports of internal probe over Rs 45 cr interest payments
This order came after an internal audit of the bank’s marketing department, covering the FY25 period, flagged these payments and rated the department’s performance as “unsatisfactory,” the report said.
The Indian Express investigation, based on internal records, found that the payments were intended for Maharashtra State Road Development Corporation as “differential interest”, or interest paid above the specified rate on its deposits. However, instead of being directly credited to MSRDC’s account as interest income, the funds were allegedly routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign via four local vendors.
Records reviewed during the probe also indicated that the payout was approved during senior-level discussions attended by Sashidhar Jagdishan. According to testimonies by several officials in the internal investigation, Jagdishan participated in calls convened to examine ways for the bank to compensate MSRDC and was part of the decision to route the differential interest through the marketing budget as a one-time arrangement.
HDFC Bank Chief Marketing Officer Ravi Santhanam acknowledged in his testimony during the vigilance probe that the marketing department acted as a “facilitator to camouflage differential interest reimbursement as marketing spend”.
Significantly, the vigilance probe report was sent to the Audit Committee of the Board (ACB) on April 10 and to the Nomination and Remuneration Committee of the Board a week later, the media report said.
Vigilance probe details
According to The Indian Express, in 2021, HDFC Bank approached MSRDC, a Maharashtra government infrastructure agency, seeking its savings deposits. The bank was then offering 3.5% interest on savings accounts. MSRDC, sources say, verbally indicated that competing financial institutions were offering 6% or higher and said it would route deposits from a major land acquisition project — anticipated to be worth around Rs 25,000 crore — through HDFC Bank if it received a rate of at least 6.01%.
MSRDC also allegedly sought an upfront fee of Rs 5 crore. The bank declined this demand. However, internal email correspondence reviewed by the vigilance team showed that the bank instead structured a 6.01% return, folding in additional interest above 6% to effectively account for MSRDC’s expectations.
To accommodate this, the bank’s Asset Liability Committee approved a special savings bank interest rate of 4.5%, applicable to certain large deposits, in anticipation that MSRDC would bring in over Rs 10,000 crore. However, when only around Rs 200 crore was received in the initial months, the 4.5% rate window was shut after two months, in April 2022.
