US law firm launches probe into HDFC Bank over potential securities law violations

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A US law firm has opened an investigation into whether HDFC Bank violated US federal securities laws, extending scrutiny of the lender beyond India after allegations around internal payments and governance triggered a sharp fall in its US-listed shares.

US-based Glancy Prongay & Rotter LLP said it is examining whether HDFC Bank issued materially misleading business information to investors or otherwise violated federal securities laws. The announcement, published on global press release distribution platform Business Wire on 22 July, urged investors who suffered losses to contact the firm.

HDFC Bank's American Depositary Shares trade on the New York Stock Exchange under the ticker HDB, making the bank subject to US securities laws in relation to disclosures made to investors.

According to the Business Wire release, the investigation was prompted by a 27 May report in The Indian Express that claimed HDFC Bank had conducted an internal vigilance probe into payments allegedly routed through its marketing department.

The report said that HDFC Bank had camouflaged ₹45 crore as marketing expenses to pay higher interest to the Maharashtra State Road Development Corporation (MSRDC), the US law firm said in the release.

According to the newspaper, the payments were allegedly meant to compensate MSRDC through "differential interest" on deposits but were routed through the bank's marketing department and shown as sponsorship expenses for road safety campaigns. It added that the arrangement may have breached Reserve Bank of India regulations, which prohibit banks from offering negotiated interest rates to individual depositors.

Following the report, HDFC Bank's ADRs fell $3.98, about 5.1%, to close at $74.10 on 27 May. The lender rejected any suggestion of wrongdoing.

Queries emailed to HDFC Bank remained unanswered until press time.

Glancy Prongay & Rotter said it is investigating whether HDFC Bank violated federal securities laws or engaged in other unlawful business practices. It also invited shareholders who suffered losses to contact the firm regarding the investigation.

The US investigation follows months of governance-related scrutiny at HDFC Bank after former chairman Atanu Chakraborty's resignation triggered questions over the bank's internal practices.

In his resignation letter dated 17 March, Chakraborty cited “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics, without elaborating on the allegations.

In an interview with CNBC-TV18 on 30 March, Chakraborty had hinted that the "mis-selling" of Credit Suisse's perpetual bonds was a bone of contention between him and the bank's management.

The bank has maintained that Chakraborty "did not mention any happenings and practices which were not in congruence with his personal values and ethics".

After Chakraborty's resignation became public and the controversy escalated in late March 2026, HDFC Bank commissioned an independent legal review by US law firm Wilson Sonsini Goodrich & Rosati and Indian law firm Wadia Ghandy & Co.

The review concluded there was no evidence to substantiate Chakraborty's allegations. The external law firms said the contemporaneous evidence they reviewed did not support his claims. The bank did not disclose the review's detailed findings.

Separately, the bank appointed Trilegal and Wadia Ghandy & Co. to examine the minutes of board meetings for any discrepancies that Chakraborty may have referred to, but did not elaborate upon, according to a Mint report.

The Reserve Bank of India has also backed the lender amid the developments. Following Chakraborty's resignation, the central bank said there were “no material concerns on record as regards its conduct or governance”.

Deputy governor Swaminathan J. said in April that supervisory concerns, whenever they arise, are addressed on an ongoing basis.

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