HDFC Bank shares drop as US law firms launch probe into alleged violations
Allegations about marketing expenses raise investor concerns about India's largest private lender.
1Investigation launched against HDFC Bank
Three US law firms are investigating allegations that HDFC Bank disguised payments to Maharashtra's road development agency as marketing expenses. The bank's shares declined following these developments and weak quarterly results. Management has strongly denied all accusations of wrongdoing.
2Sharp decline in share value
HDFC Bank shares have fallen 10% in a week and 7% over one month. The total decline since the beginning of 2026 exceeds 25%. Long-term performance remains negative: 1-year returns at -26%, 3-year at -12%. Only the 5-year period shows a modest 3% gain.
3Details of the allegations
According to The Indian Express, the bank allegedly routed payments to Maharashtra State Road Development Corporation (MSRDC) as 'differential interest' through four local vendors, recording them as road safety campaign expenses. Payments were reportedly made days before the former chairman's resignation.
4Role of US law firms
Glancy Prongay Wolke Rotter LLP, Howard G. Smith, and Frank R. Cruz are examining potential securities law violations by HDFC Bank. The firms are inviting affected shareholders to join potential litigation. No formal class action has been filed yet, but such investigations typically initiate a process that can take months.
5Bank's defense
HDFC Bank issued a statement categorically denying all allegations and rejecting assumptions based on selective information. The bank emphasized its robust internal audit processes and compliance with corporate norms. It maintains there were no irregularities in financial reporting.
6Market implications
This crisis at HDFC Bank has sent ripples through India's financial sector. The bank's stock decline has affected other private lenders. Investors are growing increasingly concerned about transparency and governance standards in the sector. Analysts warn the investigation's outcome could have significant consequences for both the bank and the industry.