HDFC Bank shares slipped 2.60 per cent on May 27 after reports emerged that the lender had internally examined transactions linked to alleged “differential interest” payments made to a Maharashtra government agency.
The stock fell as much as 2.82 per cent during intra-day trade to Rs 756.90 per share, extending its recent weakness. HDFC Bank shares are already down close to 10 per cent since March, when former chairman Atanu Chakraborty stepped down unexpectedly, triggering fresh questions around governance and internal processes at the country’s largest private sector bank.
The latest pressure on the stock comes after a report by The Indian Express, which said the bank’s audit and vigilance teams had reviewed payments worth around Rs 45 crore connected to deposits placed by the Maharashtra State Road Development Corporation (MSRDC).
According to the report, the payments were allegedly routed through the bank’s marketing budget instead of being directly paid as interest. The transactions were reportedly linked to promotional and road safety campaign expenses handled through local vendors.
The report further stated that the internal review identified accountability among certain senior executives, including top management officials. It also claimed that discussions around compensating the state-run entity through alternative routes were held at senior levels within the bank.
HDFC Bank, however, strongly denied the allegations.
In a statement quoted by multiple media outlets, the bank said it maintains “robust internal oversight, audit and control processes” and follows due procedures before arriving at any conclusions during internal reviews.
The lender also said it “strongly rejects” assumptions of wrongdoing based on selective information.
Investor sentiment around the stock has remained fragile in recent months amid continued scrutiny over leadership developments at the bank. Chakraborty’s resignation in March had drawn market attention after he cited concerns that certain practices within the organisation were not aligned with his personal values and ethics.
Separately, according to an earlier report by Reuters, legal firms appointed by the bank to examine governance-related allegations had not found material lapses so far, although the review process is still ongoing.
The issue has also come at a sensitive time for the bank, as HDFC Bank is yet to formally seek regulatory approval for the reappointment of Managing Director and CEO Sashidhar Jagdishan, whose current term ends in October this year.
Market participants said the sharp reaction in the stock reflects concerns over reputational risks rather than immediate financial impact. Analysts believe investors will closely watch the outcome of internal and legal reviews, along with any regulatory commentary, before sentiment stabilises.
Despite the recent correction, HDFC Bank remains one of the most closely tracked banking stocks in India due to its large institutional ownership and heavyweight in benchmark indices. Any prolonged uncertainty around governance could therefore keep the stock under pressure in the near term.
