Why Is HDFC Bank Facing A US Lawsuit? The ₹45 Cr MSRDC Payment Row Explained

HDFC Bank is facing a securities fraud class-action lawsuit in the US over allegations that it failed to disclose information that was material to investors. The case was filed by an investor in a New York federal court and names the bank, its managing director and CEO Sashidhar Jagdishan, and CFO Srinivasan Vaidyanathan as defendants.

The lawsuit comes after months of allegations and investigations surrounding the bank's dealings with the Maharashtra State Road Development Corporation (MSRDC), and follows a fall in the lender's US-listed shares after the allegations became public.

The complaint, filed by HDFC Bank investor Jwalant Natvarlal Soneji on August 13 in the US District Court for the Southern District of New York, seeks to represent investors who purchased or acquired HDFC securities between July 17, 2023 and May 26, 2026, according to Mint.

The lawsuit alleges that HDFC Bank and its senior executives made misleading statements and failed to disclose information about payments made to MSRDC. The allegations have not been established by a court.

How Did The Matter Reach This Point?

The controversy relates to arrangements between HDFC Bank and MSRDC in 2017 and 2021, when the bank was seeking deposits from the state-owned corporation.

The US complaint reportedly alleges that HDFC Bank paid around ₹45 crore to MSRDC, with the additional interest effectively being routed through the bank's marketing department and shown as sponsorship payments for an MSRDC road safety campaign.

The allegations came into greater focus in March 2026, when HDFC Bank's former chairman Atanu Chakraborty resigned. In his resignation letter, Chakraborty referred to "certain happenings and practices within the bank" that he had observed over the previous two years and said they were not in line with his personal values and ethics.

The US complaint later cited the resignation and alleged that HDFC Bank's American Depositary Shares, or ADS, fell 7.28% on March 18 following the disclosure.

HDFC Bank subsequently commissioned an independent legal review by US law firm Wilson Sonsini Goodrich & Rosati and Indian law firm Wadia Ghandy & Co. The review concluded that there was no evidence to substantiate Chakraborty's allegations, according to Mint.

The matter took another turn on May 27, when The Indian Express reported that HDFC Bank had allegedly disguised additional interest payments to MSRDC as marketing expenditure and sponsorship payments.

The report was followed by a fall in the bank's US-listed securities. According to the complaint cited by Mint, HDFC Bank's ADS fell 4.1% to $23.78 on May 27, amid unusually heavy trading volumes.

The allegations also led to scrutiny by US law firms. In July, three firms, Glancy Prongay & Rotter LLP, the Law Offices of Frank R Cruz and the Law Offices of Howard G Smith, announced investigations into whether HDFC Bank had violated US federal securities laws. The firms were examining whether the bank had made misleading disclosures or failed to disclose information material to investors.

At the same time, HDFC Bank's own internal review resulted in disciplinary action.

On July 23, the bank's board, based on the findings and recommendations of a special disciplinary committee of independent directors, concluded that the conduct of employees involved in the MSRDC arrangement amounted to business overreach, rather than mala fide action, personal enrichment or an improper motive.

Four days later, on July 27, the bank fined Jagdishan, Vaidyanathan and Arvind Vohra, group head of retail assets, ₹1 lakh each. Warning letters were also issued to other employees.

What Does The US Complaint Allege?

The complaint alleges that the defendants failed to tell investors that the payments to MSRDC had allegedly been presented as marketing expenditure, that senior management had approved the arrangements and that the activities could have violated regulations and HDFC Bank's own policies.

It also alleges that the arrangements resulted in interest income and operating expenses being overstated, making some of the bank's positive statements about its business and prospects misleading.

The complaint seeks compensation for investors, along with interest, legal and expert costs and other relief. It also demands a jury trial.

What Has HDFC Bank Said?

HDFC Bank has rejected suggestions of wrongdoing. The bank said it believes the lawsuit is without merit and intends to defend itself.

The bank's earlier independent legal review had also concluded that there was no evidence supporting Chakraborty's allegations.

The US lawsuit is therefore the latest development in a matter that began with questions around the bank's MSRDC arrangements, moved through internal and external investigations, and has now entered formal litigation in a US court.

However, the allegations in the complaint are claims made by the plaintiff. The filing itself does not establish that HDFC Bank or its executives violated US securities laws.