HDFC shares fall 2.6% over 'extra payout' report

Reports that HDFC Bank used "marketing expenses" to compensate a state agency for placing large deposits rattled investors, with the bank's shares falling 2.6%, erasing over Rs 30,000 cr in market cap in a single day. Maharashtra State Road Development Corporation officials said the 1.5% payout was a long-standing business model and an industry-wide convention. The bank rejected any wrongdoing even as an internal RBI probe was underway.

Amid reports that HDFC Bank used "marketing expenses" to compensate a state agency for placing large deposits, senior officials at the Maharashtra State Road Development Corporation (MSRDC) maintained that an additional 1.5% payout over the stated interest rate formed part of a long-standing business model, describing it as an industry-wide convention during land acquisition exercises.

Senior MSRDC officials told TOI that payments of this sort are often structured to avoid setting precedents in deposit pricing. "When you pay a differential amount to one depositor, you don't want to set it as a precedent. So, it is classified as a marketing expense," officials said, adding that in addition to interest banks pay commissions to intermediaries who mobilise deposits-typically linked to quarterly average balances.

RBI rules, however, disallow any incentive for deposit mobilisation. A report by The Indian Express said there was allegedly a quid pro quo arrangement in which the bank compensated the corporation for bulk deposits through marketing outlays in FY24 and FY25. The report has rattled investors with the bank's shares falling 2.6%, erasing over Rs 30,000 crore in market capitalisation in a single session.

At issue is not merely nomenclature but intent. According to the report, additional payments were effectively incentives to secure deposits-something the Reserve Bank of India explicitly prohibits. While banks are permitted to offer differential interest rates on bulk deposits-defined as term deposits of Rs 3 crore and above-such flexibility does not extend to inducements.

Nor does it apply to certain statutory schemes, including those under the Bank Term Deposit Scheme, 2006, and the Capital Gains Accounts Scheme, 1988.

The bank, for its part, has pushed back forcefully. "We strongly reject any assumptions of wrongdoing or culpability based on selective material," it said, maintaining that robust internal oversight, audit mechanisms and process controls are consistently followed. A detailed questionnaire sent to HDFC Bank remained unanswered.

The controversy follows the resignation of former chairman Atanu Chakraborty, who stepped down citing concerns around values and ethics. Since his departure, the bank's shares have declined by nearly 10%.
Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.