In an unusual development, HDFC Bank’s chief, CFO and retail assets head have been fined by the lender’s board.

The board of the country’s largest private sector bank has imposed a monetary penalty of Rs 1 lakh on the bank's managing director and CEO Sashidhar Jagdishan, chief financial officer (CFO) Srinivasan Vaidyanathan and group head (Retail Assets) Arvind Vohra for divergence from RBI direction in the Maharashtra State Road Development Corporation (MSRDC) case.

Besides, the lender issued warning letters to the remaining employees involved in the case related to garnering large deposits from MSRDC between 2017 and 2021 by allegedly paying about Rs 45 crore under the marketing spends head.

The penalising action comes soon after former Chief Election Commissioner and Finance Secretary Rajiv Kumar was appointed as part-time chairman of the bank.

The Reserve Bank of India (RBI) approved Kumar's three-year appointment as chairman of the bank effective from 15 July.

HDFC Bank in a regulatory filing said based on the findings and recommendation of the Special Disciplinary Committee of Independent Directors, the board at its meeting held on 23 July concluded that the conduct of the employees involved constituted business overreach rather than any mala fide action, personal enrichment, or improper motive.

"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 monetary penalty of Rs 1 lakh for three senior employees (the Managing Director & CEO, Chief Financial Officer and Group Head - Retail Assets), and warning letters for the remaining employees," it said.

The board further directed that the matter be communicated to the RBI, it said.

In May, HDFC Bank spokesperson had rejected any wrongdoing in the matter and stated that its internal oversight and audit mechanisms are robust and all matters are handled as per established procedures.

All issues are dealt with in accordance with the bank's established norms, and the full process is always followed before final determination post any internal review, the spokesperson had said in a statement.

"We strongly reject any assumptions of wrongdoing or culpability based on selective material," the statement added.

Earlier, media reports had claimed that the bank's audit committee had initiated a formal 'internal vigilance investigation' into payments totalling Rs 45 crore to MSRDC that were allegedly disguised as marketing expenditure.