Shares of HDFC Bank Limited touched a day low of Rs 748.50 on BSE on 29 May, dropping as much as 1.31% intraday, as selling continued for a third straight session after a media report alleged the bank made irregular payments to a state government agency to attract large deposits.

The Indian Express reported on 27 May that HDFC Bank paid Rs 45 crore to the Maharashtra State Road Development Corporation as “differential interest” on deposits. According to the report, such payments were problematic because banks are generally required to offer approved deposit rates rather than individually negotiated ones. 

The payments were allegedly not booked as interest at all. Instead, they were routed through the bank’s marketing department and recorded as contributions to a road safety campaign run via four local vendors.

According to the Indian Express report, the bank’s audit committee ordered an internal vigilance investigation into the matter on 12 March, days before part-time Chairman Atanu Chakraborty resigned on 18 March. 

In his resignation, Chakraborty said certain practices at the bank were not in line with his personal values and ethics, without naming specific issues. HDFC Bank denied any wrongdoing.

The bank told that it has ‘robust internal oversight, audit and control processes’ and strongly rejected ‘any assumptions of wrongdoing or culpability based on selective material.’ In a separate statement, it said the matter had no material impact on its financial statements and that its internal controls were intact. 

Legal firms appointed by the bank to review governance concerns have yet to find material lapses, Reuters reported earlier this month. CEO Sashidhar Jagdishan’s three-year term ends in October, and the bank has still not submitted a reappointment application to the RBI.

At 12:05 pm on 29 May, HDFC Bank was trading at Rs 757.80 on BSE, down 0.09% from the previous close of Rs 758.50. 

The stock opened at Rs 749.00 and hit Rs 748.50 at its session low before recovering most of the ground. Year-to-date, the stock has shed 23%, and trades roughly 26% below its 52-week high of Rs 1,020.35.

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