HDFC Bank has concluded its internal review into transactions linked to the Maharashtra State Road Development Corporation (MSRDC), penalising its top brass for what it termed "business overreach."
According to a stock exchange filing, India's largest private lender has imposed a monetary penalty of Rs 1 lakh each on three senior executives: Managing Director and CEO Sashidhar Jagdishan, Chief Financial Officer Srinivasan Vaidyanathan, and Group Head of Retail Assets Arvind Vohra.
Alongside the financial penalty, the bank will issue formal warning letters to the three officials. The disciplinary action comes after the internal probe determined that the conduct of the executives in the MSRDC matter crossed the line into business overreach.
The regulatory disclosure brings a formal close to the internal investigation surrounding the state-owned road development agency, with the bank taking the rare step of holding its highest-ranking officials directly accountable.
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Background Of The MSRDC Case
The controversy dates back to reports claiming that HDFC Bank paid approximately Rs 45 crore to MSRDC through its marketing department under the guise of a road safety awareness campaign. Internal records cited in media reports alleged that the payments were effectively made to compensate the state agency with higher returns on its deposits, raising concerns over whether the transactions complied with banking regulations and accounting norms.
The issue gained further attention after former Chairman Atanu Chakraborty resigned earlier this year, citing ethical concerns. Although an independent legal review commissioned by the bank subsequently found no evidence to substantiate broader governance allegations, the board continued examining the MSRDC-related transactions through an internal review.
Investor Focus Remains On Governance
The MSRDC matter has remained one of the biggest governance issues faced by HDFC Bank in recent years. It has also drawn attention outside India, with multiple US law firms announcing investigations into whether the lender's disclosures regarding the alleged payments complied with US federal securities laws, particularly because HDFC Bank's American Depositary Receipts (ADRs) trade in the United States.
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