Mumbai: HDFC Bank is facing serious governance and compliance questions after an internal vigilance investigation reportedly found that the bank routed nearly Rs 45 crore in “differential interest” payments to Maharashtra State Road Development Corporation (MSRDC) under the guise of marketing and sponsorship expenses, according to a report by The Indian Express.
The investigation, initiated by the bank’s Audit Committee of the Board (ACB) on March 12, reportedly followed an internal audit of the marketing department for FY24 and FY25, which flagged payments linked to a “Road Safety Awareness Campaign” and rated the department’s performance as “unsatisfactory”.
As per the report, the payments were allegedly structured to compensate MSRDC with a higher effective return on deposits than what was officially permissible under banking norms. Instead of crediting the amount directly as interest, the funds were routed through the bank’s marketing budget as sponsorship and campaign contributions processed via local vendors.
Internal records cited in the report allegedly show that senior executives, including HDFC Bank MD & CEO Sashidhar Jagdishan, were part of discussions where a 6.01% return structure for MSRDC was verbally agreed upon. The report further claimed that the arrangement lacked formal documentation and was not vetted by legal or compliance teams.
The vigilance probe reportedly found that HDFC Bank’s marketing department paid around Rs 39.7 crore during FY24 and FY25 towards MSRDC-linked road safety campaigns. However, auditors allegedly failed to verify the rationale or methodology behind the sponsorship amounts, while vendor invoices and supporting documentation were found to be inadequate.
According to the report, some invoices lacked proper event confirmation certificates and one photograph was allegedly reused across multiple invoices amounting to nearly Rs 9 crore. The audit also noted that there was little evidence demonstrating the scale or execution of any actual awareness campaign in the bank’s name.
In statements recorded during the vigilance inquiry, HDFC Bank Chief Marketing Officer Ravi Santhanam reportedly acknowledged that the marketing department had acted as a “facilitator” in routing the payments through sponsorship spends. The report further alleged that a portion of the expenditure was used to create the appearance of legitimate marketing activity.
The arrangement reportedly originated in 2021, when HDFC Bank sought large savings deposits from MSRDC. While the bank’s standard savings rate stood at 3.5%, MSRDC allegedly sought returns exceeding 6%. After a temporary special interest structure was discontinued, the remaining payout obligation was allegedly compensated through the marketing budget route.
The vigilance findings, according to the report, flagged potential violations of RBI regulations prohibiting negotiated deposit rates for individual customers, along with breaches of the bank’s anti-bribery and anti-corruption policies.
The report also named senior officials, including CFO Srinivasan Vaidyanathan, in connection with the arrangement, alleging that the reimbursement mechanism through marketing spends was approved without formal governance or compliance oversight.
Neither HDFC Bank nor the Reserve Bank of India had responded to queries from The Indian Express at the time of publication.
