HDFC Bank Ltd has been sued in the US in a proposed securities class action in which an investor alleges that the lender concealed a scheme involving around ₹45 crore in payments to the Maharashtra State Road Development Corporation (MSRDC) by recording them as marketing expenditure. Last month,
after an internal review in the same matter, the board of HDFC Bank 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.
HDFC Bank closed Thursday 2% down at ₹712 on BSE, while the 30-share Sensex ended the day marginally down at 76933.59 points.
The lawsuit, filed by investor Jwalant Natvarlal Soneji in the US district court for the Southern District of New York, names HDFC Bank, Mr Jagdishan and Mr Vaidyanathan as defendants. The case, Soneji vs HDFC Bank, was filed on 13 August 2026 and has been assigned case number 26-cv-06943.
The proposed class covers investors who purchased or acquired HDFC Bank securities between 17 July 2023 and 26 May 2026. The plaintiff alleges that the Bank and its senior executives violated US securities laws by making materially misleading statements and failing to disclose information regarding the alleged arrangement and related internal control issues.
The allegations in the complaint have not been proven in court. HDFC Bank has rejected the lawsuit as without merit and said it intends to defend itself vigorously.
₹45 Crore Allegedly Routed as Marketing Expenditure
At the centre of the lawsuit is an alleged arrangement involving MSRDC, a Maharashtra government-owned infrastructure company.
According to the complaint, HDFC Bank offered MSRDC an effective interest rate of 6.01% on deposits, compared with a standard savings rate of around 3.5%. The alleged differential of 2.51 percentage points forms the basis of the plaintiff's claim that the Bank provided a preferential return to attract substantial deposits.
The complaint alleges that the additional interest was not shown as interest payments. Instead, around ₹45 crore allegedly paid during 2023-2025 was routed through the Bank's marketing function and presented as sponsorship expenditure connected with an MSRDC road-safety awareness campaign.
The Indian Express had reported in May that an internal vigilance investigation examined payments totalling ₹45 crore to MSRDC during FY23-24 and FY24-25. The newspaper reported that the payments had been treated as sponsorship expenditure despite allegedly being linked to a higher return on MSRDC's deposits.
The US complaint relies substantially on that report and alleges that the arrangement was intended to circumvent restrictions relating to negotiated returns on deposits.
MD&CEO Jagdishan Named in Allegations
The lawsuit also draws on the reported findings of the internal investigation into the MSRDC transactions.
According to the Indian Express report cited in the complaint, more than 10 senior officials were found to be responsible for the payments. The report said the higher rate for MSRDC was verbally agreed upon during senior-level discussions in the presence of Mr Jagdishan.
The complaint alleges that the conduct violated Reserve Bank of India (RBI) requirements and the Bank's own policies concerning improper inducements.
The allegations put the focus not merely on the accounting treatment of the expenditure but also on whether senior management properly disclosed material information about the bank's compliance framework and internal controls to investors in the US.
SEC Filings under Scrutiny
The plaintiff has alleged that HDFC Bank's disclosures to US investors were materially misleading during the proposed class period.
The complaint points to HDFC Bank's form20-f annual reports for FY23-24 and FY24-25, in which management stated that its internal control over financial reporting was effective. The plaintiff argues that those representations failed to disclose the alleged conduct involving MSRDC and therefore gave investors an incomplete picture of the Bank's control environment.
The complaint further alleges that treating the differential interest as marketing expenditure affected the presentation of the Bank's expenses and financial performance.
The lawsuit seeks to establish liability under Sections 10(b) and 20(a) of the US Securities Exchange Act of 1934. The plaintiff is seeking class certification, compensatory damages to be determined by the court and a jury trial.
Chakraborty's Resignation Adds to Investor Scrutiny
The lawsuit also refers to the abrupt resignation of HDFC Bank's then part-time chairman Atanu Chakraborty in March.
At the time, however, Mr Chakraborty did not publicly identify the specific practices that had prompted his resignation. He subsequently said there was no single trigger and described the decision as the result of a broader build-up of concerns.
The MSRDC matter came into public focus later, after The Indian Express published its investigation on 27 May 2026. According to reports, HDFC Bank's US-traded shares fell about 4.1% that day following the publication of the report.
Bank Calls Lawsuit without Merit
HDFC Bank has rejected the allegations and said it will defend the case. "In the US, these types of shareholder lawsuits are incredibly common after a company experiences a stock drop, and many companies listed in the US routinely defend these lawsuits each year. The Bank believes the lawsuit is without merit and intends to vigorously defend itself," HDFC Bank said.
The lawsuit, therefore, represents the latest escalation of the controversy from an internal governance and compliance issue into a US securities litigation matter.
Separate Review into Chairman's Concerns
The legal action comes after HDFC Bank itself commissioned an external review of concerns raised by Mr Chakraborty when he resigned.
In June, HDFC Bank said law firms Wilson Sonsini Goodrich & Rosati and Wadia Ghandy & Co had concluded that Mr Chakraborty's allegations and their implications were not substantiated by the documentary evidence and witness interviews reviewed.
That review is separate from the US investor lawsuit, which is based on allegations concerning the MSRDC payments, the Bank's disclosures and the impact of those matters on investors.
Investors Seek Damages after Share Price Declines
The plaintiff's case rests in part on the argument that investors bought HDFC Bank securities at artificially inflated prices because material information about the alleged conduct was not disclosed.
The complaint identifies two significant market reactions. After Mr Chakraborty's resignation on 18 March 2026, HDFC's US-traded shares fell sharply. Following the 27 May 2026 disclosure regarding the MSRDC payments, the shares declined by another 4.1%, according to litigation-related filings and reports.
The latest lawsuit adds another layer of legal and governance scrutiny for India's largest private-sector lender by assets.
As of 27 August 2026, HDFC Bank's shares were under renewed pressure, with
Reuters reporting that the stock fell as much as 2.37% to a 29-month low on Thursday amid concerns over leadership stability, regulatory issues, and an emerging US class action.
Reuters reported that the stock was down about 28% for the year.
The US court will now determine whether the proposed class action can proceed and, subsequently, whether the allegations can be established. The filing itself is not a finding that HDFC Bank or its executives violated US securities laws.
banks HDFC Bank is finding it difficult to mint money.one more thing is all banks are making good money in india inspite of strict regulations because their spreads are very high which even RBI knows compared to world wide banks.