HDFC Bank: Under a cloud | Photo Credit: SHAILESH ANDRADE

HDFC Bank has been in the news for the wrong reasons since March, when its Chairman Atanu Chakraborty resigned after dropping vague hints about internal trouble. Since then, some unsavoury developments have come into view, such as the Bank’s convoluted dealings with Maharashtra State Road Transport Corporation (MSRDC). The episode raises a governance question at a micro level; at a macro level, it appears that banks are increasingly crossing red lines to attract wholesale or bulk deposits. With households channelling their savings into higher yielding investments such as mutual funds and stock markets, competition for bulk deposits has intensified.

In May, a special disciplinary committee of independent directors of HDFC Bank had been asked to investigate how the differential interest (difference between publicly stated interest rate and the higher rate paid to MSRDC) of ₹45 crore had been shown as payments made to four local vendors for road safety awareness campaigns, run by the marketing department. This is not all. In March, the bank terminated three senior officials working in Dubai and Bahrain branches for alleged misselling of AT-1 bonds of Credit Suisse to its NRI clients. The zeal to grow business quickly to meet targets and satisfy investors is, however, not limited to HDFC Bank. A report in this newspaper noted that banks are chasing bulk depositors such as public sector companies, temple trusts and companies with huge cash surplus, paying them much higher rates than regular deposits.

Trying to grow the deposit base with the more stable wholesale deposits is acceptable — but failure to make the right disclosures or misrepresentation of the information in financial statements is surely a governance lapse. The Reserve Bank of India’s rules allow banks to offer differential rates for bulk deposits provided these rates are published on their website at the beginning of each working day and offered to all borrowers in the category. Meanwhile, the HDFC Bank Board’s view that the MSRDC case merely amounted to a business overreach (with no malafide intent), betrays a cavalier approach. The ridiculously low penalties of ₹1 lakh slapped on the Managing Director and CEO, Chief Financial Officer, Group Head –Retail Assets and other employees appear aimed towards placating the RBI and bringing the matter to a close rather than serve as a deterrent.

It is to be seen how this case affects the reappointment of Sashidhar Jagdishan as Managing Director and CEO. According to the statement issued by the bank, the special disciplinary committee has recommended warnings and penal actions against Jagdishan and others for potential divergence from RBI’s norms. The guidelines for appointment/ reappointment of a Bank CEO require that due diligence be done regarding expertise, track record, integrity and other fit and proper criteria. The person at the helm of a systemically important bank ought to be above reproach.

Published on July 30, 2026