HDFC Bank shares declined on Wednesday after a newspaper report alleged that India’s biggest private lender made payments to a Maharashtra state department to secure large deposits, raising fresh questions over governance at the bank.
The stock fell as much as 2% and was trading 1.9% lower at 764.20 rupees as of 10:40am in Mumbai.
The benchmark BSE Sensex was little changed.
The Indian Express reported that HDFC Bank paid 450 million rupees to Maharashtra State Road Development Corporation and booked the transfers as marketing expenses.
HDFC Bank did not immediately respond to an emailed request for comment.
The allegations have put renewed attention on the bank’s internal controls, legal review and leadership transition process.
Report raises governance questions
According to the Indian Express report, the alleged payments were made to attract large deposits from the state-run entity.
The report also alleged that Chief Executive Officer Sashidhar Jagdishan was aware of the dealings.
If confirmed, such payments could raise questions over whether a bank effectively offered additional benefits to secure deposits outside normal interest-rate terms.
Banks are expected to treat depositors consistently within the framework of applicable rules. Any suggestion that payments were routed through marketing expenses to win deposits could attract closer scrutiny from regulators and investors.
Legal review remains under way
The latest report comes against an already sensitive governance backdrop for HDFC Bank.
Earlier media reports about alleged lapses had prompted the lender to engage legal firms to review certain practices.
Those firms had not found any material deviation from the bank’s practices so far, according to the supplied details, though the review remains ongoing and no final conclusion has been reached.
That leaves investors waiting for clarity on whether the review identifies any governance concerns, and whether the bank issues a detailed response to the latest allegations.
The stock has fallen 9.5% since the chairman’s resignation on March 19, adding to market sensitivity around governance and leadership issues.
CEO reappointment in focus
The allegations also come as investors watch the next steps in Jagdishan’s reappointment process.
His three-year term is due to end in October, and the reappointment application has not yet been filed with the Reserve Bank of India.
Any regulatory concern arising from the media report or the legal review could become important for shareholders assessing the timing and outcome of that process.
For now, the key questions are whether HDFC Bank provides a detailed rebuttal or clarification, whether the legal review reaches a firm conclusion, and whether the RBI seeks additional information.
The near-term focus is likely to remain on the bank’s response, the outcome of the governance review and any regulatory reaction to the reported payments.
Until then, the shares may remain vulnerable to further headlines around governance and management continuity.
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