India's HDFC Bank finds no improper motive in deposit pricing review, penalises executives

BENGALURU: India’s HDFC Bank said its board concluded that employees involved in setting deposit rates for a state agency had engaged in business overreach, rather than acting for personal gain, and had decided to penalise three senior executives.

India’s largest private lender said on Monday that it would issue warning letters and impose a penalty of 100,000 rupees ($1,042.64) each on the bank’s chief executive officer, chief financial officer and, the head of retail assets.

The decision followed recommendations by a Special Disciplinary Committee of Independent Directors that reviewed the matter.

Media reports in May said that the lender had offered preferential rates on certain large deposits to Maharashtra State Road Development Corporation, an infrastructure agency in Maharashtra state, in violation of the central bank’s rules.

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At the time, an HDFC Bank spokesperson told Reuters that the lender had robust internal oversight, audit and control processes and systems.

“All issues are dealt with in accordance with established norms, and full process is always followed before final determination post any internal review,” the spokesperson said.

Reuters reported last week that the review was still underway, contributing to a delay in the Reserve Bank of India’s approval of CEO Sashidhar Jagdishan’s reappointment. His term is due to end in October.

HDFC Bank has faced investor scrutiny since mid-March when former chairman Atanu Chakraborty resigned abruptly, saying practices at the bank were not in line with his “personal ethics”. An external legal review completed last month found no evidence to substantiate the governance concerns he raised.

Still, the stock has underperformed, declining 25% so far this year compared to an 8% drop in the benchmark Nifty 50 index.