The bank decided to issue warning letters and impose a Rs 1 lakh monetary penalty each on Managing Director and CEO Sashidhar Jagdishan, Chief Financial Officer Srinivasan Vaidyanathan, and Group Head of Retail Assets Arvind Vohra.
While the penalties are symbolic in financial terms, the case has evolved into one of the most closely watched corporate governance controversies in India's banking sector. It has delayed the RBI's decision on Jagdishan's reappointment, triggered overseas legal scrutiny and raised questions about how banks compete for large government deposits.
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What Is The MSRDC Case?
The controversy centres on HDFC Bank's deposit relationship with the Maharashtra State Road Development Corporation (MSRDC), a Maharashtra government undertaking that manages major infrastructure projects, including the Mumbai-Pune Expressway.
The issue dates back to 2017 and 2021, when the bank allegedly offered MSRDC preferential returns on large deposits through arrangements that may not have complied with the Reserve Bank of India's (RBI) rules governing deposit pricing.
Media reports later alleged that nearly Rs 45 crore paid to MSRDC was booked through the bank's marketing budget, instead of being reflected as interest paid on deposits. Critics argued that such an accounting treatment could obscure the true cost of acquiring deposits.
Although the bank has never admitted to violating RBI regulations, the allegations prompted an internal disciplinary review and attracted the attention of investors, analysts and regulators.
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Why Did HDFC Bank Conduct An Internal Probe?
HDFC Bank board constituted a Special Disciplinary Committee of Independent Directors to investigate the MSRDC deposit arrangements.
The committee examined whether employees had violated internal processes or RBI guidelines while securing deposits from the state agency.
After completing its investigation, the committee concluded that the employees involved had engaged in business overreach, meaning they had exceeded acceptable business practices in pursuit of deposits. However, it found no evidence of personal financial gain, corruption or malicious intent by the executives.
Based on these findings, HDFC Bank's board accepted the committee's recommendations and imposed disciplinary action.
CEO Sashidhar Jagdishan, CFO Srinivasan Vaidyanathan and Group Head of Retail Assets Arvind Vohra will each receive a formal warning letter and pay a Rs 1 lakh penalty. The bank also confirmed that other employees involved in the matter have been issued warning letters.
Importantly, the board stopped short of accusing any executive of fraud, misconduct for personal enrichment or intentional regulatory violations.
The case has also drawn international attention because HDFC Bank's American Depositary Receipts (ADRs) are listed on the New York Stock Exchange. Several US law firms have launched investigations into whether the bank adequately disclosed the alleged MSRDC-related payments and whether investors were misled by the accounting treatment.
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