HDFC Bank has rejected allegations of Rs 45 crore payment wrongdoing routed through its marketing department to a Maharashtra government agency in a bid to attract large deposits. 

The Reserve Bank of India (RBI) does not allow lenders to pay varied interest rates to depositors.

Responding to the media report, HDFC Bank asserted that its internal oversight and audit mechanisms are robust and all matters are handled as per established norms.

Indian Express had earlier reported that HDFC Bank disguised the additional payments ⁠to Maharashtra State Road Development Corporation (MSRDC) as marketing spends to incentivise the department to make the deposits.

The payments were allegedly made to the Maharashtra government undertaking just days before former chairman Atanu Chakraborty resigned on 18 March.

The Indian Express reported that the payments were intended for MSRDC as “differential interest”, or interest paid above the specified rate on its deposits. The funds, however, were allegedly routed through the bank’s marketing department and shown as contributions towards a road safety awareness campaign via four local vendors, instead of being directly credited to MSRDC’s account as interest income.

The report further revealed that the payout was approved in the presence of HDFC Bank MD & CEO Sashidhar Jagdishan during senior-level discussions where a higher rate for MSRDC was “verbally” agreed upon.

Jagdishan "participated in the call convened to examine how the bank could compensate MSRDC and was part of the decision to provide the differential interest through the marketing budget as a one-off arrangement.”

According to the media report, HDFC Bank chief marketing officer Ravi Santhanam also acknowledged in his testimony during the vigilance probe that the marketing department acted as a “facilitator to camouflage differential interest reimbursement as marketing spend”.

This, according to the media report, had violated the Master Directions on interest rates on deposits. The Reserve Bank of India explicitly prohibits banks from offering negotiated returns to individual depositors. 

While resigning Chakraborty had not made ⁠specific allegations but stated that practices at the bank were not in line with his "personal" values and ethics.

HDFC Bank had later appointed legal firms to review the claims. The outcome of the legal review is awaited.

Jagdishan’s three-year term ends in October. The bank has yet to submit an application to the RBI for his reappointment.