Today, HDFC Bank has said that it has completed its internal review of the arrangement made with the Maharashtra State Road Development Corporation (MSRDC) for mobilising deposits in 2017 and 2021. According to the Indian Express Report, HDFC Bank’s internal vigilance probe found that payments worth about Rs 45 crore were made to Maharashtra State Road Development Corporation (MSRDC) during FY24 and FY25 as “differential interest”.
What is Differential Interest: Differential interest means the extra interest amount paid above the normal or agreed rate. For example, if a bank should pay 6% interest but pays more than that, the extra amount is called differential interest.
These payments were routed through the bank’s marketing department and shown as sponsorship spending for a road safety awareness campaign. The bank’s Audit Committee of the Board ordered a formal internal vigilance investigation on March 12 after an internal audit of the marketing department flagged the payments and rated the department’s performance as “unsatisfactory”.
The report said the payments were meant to compensate MSRDC for interest above the specified rate on its deposits. Instead of being credited directly as interest, the money was allegedly routed through the marketing department as campaign contributions through four local vendors.
For the advertising and marketing industry, the issue is not just a banking governance matter. It also raises questions about how large sponsorship and marketing budgets are approved, documented, executed, and audited, especially in regulated sectors such as banking and financial services.
What Did the Internal Review Find?
After the report was published by the Indian Express, HDFC Bank appointed a Special Disciplinary Committee consisting of Independent Directors, to investigate the case.
The Board concluded that the actions of the employees involved amounted to business overreach. However, it found no evidence of any mala fide intention, personal enrichment, or improper motive on the part of the employees.
Although the Board did not find any dishonest intention, it observed that there could have been a possible divergence from the applicable Reserve Bank of India (RBI) directions. Based on the recommendations of the Special Disciplinary Committee, the bank decided to take disciplinary action.
HDFC Bank has issued warning letters and imposed a monetary penalty of ₹1 lakh each on three senior officials, including the Managing Director & CEO, the Chief Financial Officer (CFO), and the Group Head – Retail Assets. The remaining employees involved in the matter have been issued warning letters.
Click here to read Indian Express Report in detail
