Following an internal review into its arrangements with Maharashtra State Road Development Corporation (MSRDC) for mobilising deposits in 2017 and 2021, the board of HDFC Bank Ltd has imposed a monetary penalty of ₹1 lakh each on its managing director & chief executive officer (MD&CEO) Sashidhar Jagdishan, chief financial officer (CFO) Srinivasan Vaidyanathan and group head – retail assets Arvind Vohra, while issuing warning letters to these three and other employees involved in the matter.
The country's largest private sector lender said its board, at a meeting held on 23 July 2026, acted on the findings and recommendations of a special disciplinary committee of independent directors which concluded that the conduct of the employees involved amounted to 'business overreach' rather than any mala fide action, personal enrichment or improper motive.
The issue came into public focus in May after media reports alleged that about ₹45 crore was paid to MSRDC during FY23-24 and FY24-25 through marketing expenses classified as 'differential interest' to attract deposits from the state-owned agency.
In
a regulatory filing, the board of HDFC Bank said there could have been a 'potential divergence' from applicable directions from Reserve Bank of India (RBI) and, therefore, decided to initiate disciplinary action against the executives.
"The board concluded that the conduct of the employees involved constituted business overreach rather than any mala fide action, personal enrichment, or improper motive," the Bank said in a its statement issued on Monday.
"However, keeping in view any potential divergence with the applicable RBI directions and based on the recommendations of the special disciplinary committee of independent directors, the board decided to issue warning letters and a monetary penalty of ₹1 lakh for three senior employees (the MD&CEO, CFO and group head – retail assets), and warning letters for the remaining employees."
The board also directed that the matter be communicated to RBI.
The disciplinary action follows an internal vigilance review into HDFC Bank's arrangements with MSRDC for garnering deposits in 2017 and 2021.
According to the reports, the payments were allegedly booked as marketing expenses rather than being reflected as additional interest paid on deposits.
At the time, HDFC Bank had strongly denied any wrongdoing.
"The Bank has robust internal oversight, audit and control processes and systems. All issues are dealt with in accordance with the bank's established norms, and full process is always followed before final determination post any internal review. We strongly reject any assumptions of wrongdoing or culpability based on selective material," the lender had said in a statement issued on 27 May 2026.
The board's findings stop short of attributing fraud or personal misconduct to the senior executives.
Instead, it characterised the issue as 'business overreach', while acknowledging that aspects of the arrangement may not have fully aligned with RBI directions governing such transactions.
The decision to impose financial penalties on the MD&CEO, CFO and another senior executive, while simultaneously stating that there was no mala fide intent or personal gain, reflects the HDFC Bank board's attempt to balance accountability with its assessment that the conduct did not amount to deliberate wrongdoing.
The disciplinary action is also notable because such penalties imposed by a bank's board on serving top executives are relatively uncommon in the Indian banking sector.
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