Three US-based law firms have launched investigations into HDFC Bank over possible violations of US federal securities laws.
The three law firms—The Law Offices of Frank R. Cruz, The Law Offices of Howard G. Smith, and Glancy Prongay Wolke & Rotter LLP—said in separate releases this week that investors who suffered losses in HDFC Bank securities could contact them about “potentially pursuing claims” to recover their losses.
“Glancy Prongay Wolke & Rotter LLP, a leading national shareholder rights law firm, today announced that it has commenced an investigation on behalf of HDFC Bank Limited investors concerning the company’s possible violations of the federal securities laws,” the law firm said in a release dated July 22.
The investigations follow a report by The Indian Express alleging that the private sector lender disguised ₹45 crore in payments to the Maharashtra State Road Development Corporation (MSRDC) as marketing expenses.
Impact on HDFC Bank ADRs
According to the law firms, HDFC Bank’s stock price declined $1.02, or 4.1%, to close at $23.78 following the news, allegedly causing losses to investors. HDFC Bank’s American Depository Receipts (ADRs) are listed on the New York Stock Exchange.
HDFC Bank’s ADRs fell as much as 2.8% to $23.07 on Wednesday. At the time of going to press, the ADR was down 1.5% at $22.83. On Thursday, HDFC Bank shares declined nearly 1% to ₹745.85 on the NSE.
The bank did not respond to queries from Financial Express.
“In the US, law firms can take up cases on a contingency or success-fee basis, so they’ll first assess whether there’s a reasonable chance of winning. They’ll examine if HDFC Bank has breached any US securities laws. Since they get paid only if the case succeeds or a settlement is reached, they’re willing to take on the litigation without charging clients upfront,” Shriram Subramanian, Founder and MD of InGovern Research Services said.
He added that the law firms also have to identify investors who suffered losses as a result of the alleged wrongdoing and establish a clear link between the violation and the damage caused.
Origins of the Probe
In May, The Indian Express, citing internal documents and interviews with bank officials, reported that HDFC Bank’s audit committee had ordered an internal vigilance investigation into payments totalling around ₹45 crore made to MSRDC during FY24 and FY25.
According to the report, the payments were allegedly routed through the bank’s marketing department as contributions towards road safety awareness campaigns, instead of being directly credited as interest payments.
The report alleged that the arrangement was used to compensate MSRDC for a differential interest commitment above the bank’s standard savings deposit rates, potentially raising regulatory and governance concerns.
Responding to the allegations, HDFC Bank had said: “The Bank has robust internal oversight, audit and control processes and systems. All issues are dealt with in accordance with Bank’s established norms, and full process is always followed before final determination post any internal review. We strongly reject any assumptions of wrongdoing or culpability based on selective material.”
The report further said the vigilance probe examined the role of several senior executives, including Managing Director and CEO Sashidhar Jagdishan, Chief Financial Officer Srinivasan Vaidyanathan and Chief Marketing Officer Ravi Santhanam.