A shareholder class action has been filed against HDFC Bank over allegations it disguised about $4.7 million in payments to induce deposits from a state firm. The lawsuit covers investors who bought American Depositary Shares between July 17, 2023 and May 26, 2026, with a lead plaintiff deadline of October 12.
A shareholder class action has been filed against HDFC Bank over allegations it disguised $4.7 million in payments to induce deposits from a state firm.
"Certain happenings and practices within the bank, that I have observed over last two years, are not in congruence with my personal Values and Ethics," Atanu Chakraborty wrote in his March 18 resignation letter as part-time Chairman and Independent Director.
The lawsuit, filed by Holzer & Holzer, the Law Offices of Howard G. Smith and the Law Offices of Frank R. Cruz, covers investors who bought HDFC American Depositary Shares between July 17, 2023 and May 26, 2026. The Indian Express reported May 27 that HDFC made covert payments of about Rs 45 crore to the Maharashtra State Road Development Corporation, offering 6.01 percent interest — a 2.51 percentage-point markup over other savings accounts — while disguising the difference as sponsorship for a road safety awareness campaign. An internal probe in March and April concluded more than ten senior officials bore responsibility, including Chief Executive Sashidhar Jagdishan.
HDFC's ADS fell $2.09, or 7.28 percent, to $26.62 on March 18 after Chakraborty's resignation, and dropped another $1.02, or 4.1 percent, to $23.78 on May 27 after the Indian Express report, both on unusually heavy trading volume. Investors have until October 12 to file a lead plaintiff motion.
The complaint alleges HDFC failed to disclose that the payments were approved by senior management, likely violated regulations and company policies prohibiting improper inducement, and overstated interest income and operating expenses. The company filed the resignation letter with the Bombay Stock Exchange and the National Stock Exchange of India.
The allegations center on whether the bank's deposit-gathering practices breached rules barring payments that constitute improper inducement. The complaint contends the covert payments inflated HDFC's interest income and operating expenses, making its reported financials misleading to investors during the class period.
The lawsuit adds legal and regulatory risk to India's largest private lender, which faces potential fines and heightened scrutiny of its deposit practices. The class action seeks unspecified damages for investors who held the securities during the period. Investors will watch the lead plaintiff appointment and any action from the Reserve Bank of India.
This article is for informational purposes only and does not constitute investment advice.
