Why HDFC Bank is facing a lawsuit in the US
A complaint has been filed against HDFC Bank in US District Court, Southern District of New York for alleged violations of federal securities laws.
- Aug 27, 2026,
- Updated Aug 27, 2026 9:49 AM IST
Troubles don’t seem to end for HDFC Bank, with the India’s largest private sector lender now facing a lawsuit in the United States for alleged violations of federal securities laws.
The lawsuit is related to the fall in HDFC Bank shares following a news report that had appeared on May 27, 2026 alleging the lender had made payments worth ₹45 crore to Maharashtra State Road Development Corporation (MSRDC) as higher interest for their deposits and that this was disguised under marketing budgets and sponsorships for a road safety drive.
Business Today had reported on July 23 that three law firms had said they would probe whether there had been any possible violation of federal securities laws. Subsequently, a class action suit has now been filed in the US District Court, Southern District of New York by one Jwalant Natvarlal Soneji against HDFC Bank, MD and CEO Sashidhar Jagdishan and Srinivasan Vaidyanathan the bank’s CFO.
The lawsuit cites that following the Indian Express news report that said HDFC Bank camouflaged crores as marketing spend to pay higher interest to state firm, the price of the bank’s US-listed American Depository shares (ADS) fell $1.02 or 4.1 per cent to close at $23.78 on May 27, 2026, on unusually heavy trading volumes.
“Throughout the class period, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects,” the complaint states.
Specifically, it says, defendants failed to disclose to investors that HDFC Bank camouflaged payments as marketing spend to pay higher interest to a state firm in order to induce deposits, these activities were approved by senior management, these activities likely violated regulations and the company’s own policies, including those that prohibit payments that could constitute improper inducement, as a result of the foregoing, the company’s interest income and operating expenses were overstated, and as a result, defendants’ positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
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“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” the complaint stated.
The plaintiff has demanded a jury trial, award of compensation for the damages sustained as a result of defendants’ “wrongdoing” in an amount to be proven at trial, including interest. The plaintiff is also seeking costs and expenses incurred in filing this lawsuit.
On July 27, HDFC Bank fined Jagdishan, Vaidyanathan, and Arvind Vohra, group head (retail assets), ₹1 lakh each, while warning letters were also issued to other employees following the conclusion of an internal review process pertaining to the arrangement with MSRDC for garnering deposits in 2017 and 2021.
According to HDFC Bank, based on the findings and recommendation of the special disciplinary committee of independent directors, the board at its meeting held on July 23, 2026, concluded that the conduct of the employees involved constituted business overreach rather than any mala fide action, personal enrichment, or improper motive.
MUST READ | HDFC Bank shares may fall to Rs 675-680, ICICI Bank a better pick, says Gaurav Sharma
HDFC Bank shares have been in the spotlight this week after a group of investors alleged they were sold a high yielding third party life settlement fund as an investment opportunity between 2017 and 2019, the fund later stopped redemptions, leaving them in the lurch.
In that matter, HDFC Bank has said it had only facilitated the investments and that the onus of the fund performance and redemptions lay with that fund house.
Troubles don’t seem to end for HDFC Bank, with the India’s largest private sector lender now facing a lawsuit in the United States for alleged violations of federal securities laws.
The lawsuit is related to the fall in HDFC Bank shares following a news report that had appeared on May 27, 2026 alleging the lender had made payments worth ₹45 crore to Maharashtra State Road Development Corporation (MSRDC) as higher interest for their deposits and that this was disguised under marketing budgets and sponsorships for a road safety drive.
Business Today had reported on July 23 that three law firms had said they would probe whether there had been any possible violation of federal securities laws. Subsequently, a class action suit has now been filed in the US District Court, Southern District of New York by one Jwalant Natvarlal Soneji against HDFC Bank, MD and CEO Sashidhar Jagdishan and Srinivasan Vaidyanathan the bank’s CFO.
The lawsuit cites that following the Indian Express news report that said HDFC Bank camouflaged crores as marketing spend to pay higher interest to state firm, the price of the bank’s US-listed American Depository shares (ADS) fell $1.02 or 4.1 per cent to close at $23.78 on May 27, 2026, on unusually heavy trading volumes.
“Throughout the class period, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects,” the complaint states.
Specifically, it says, defendants failed to disclose to investors that HDFC Bank camouflaged payments as marketing spend to pay higher interest to a state firm in order to induce deposits, these activities were approved by senior management, these activities likely violated regulations and the company’s own policies, including those that prohibit payments that could constitute improper inducement, as a result of the foregoing, the company’s interest income and operating expenses were overstated, and as a result, defendants’ positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
DON'T MISS | What are life settlement funds and why is HDFC Bank in the spotlight over it?
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” the complaint stated.
The plaintiff has demanded a jury trial, award of compensation for the damages sustained as a result of defendants’ “wrongdoing” in an amount to be proven at trial, including interest. The plaintiff is also seeking costs and expenses incurred in filing this lawsuit.
On July 27, HDFC Bank fined Jagdishan, Vaidyanathan, and Arvind Vohra, group head (retail assets), ₹1 lakh each, while warning letters were also issued to other employees following the conclusion of an internal review process pertaining to the arrangement with MSRDC for garnering deposits in 2017 and 2021.
According to HDFC Bank, based on the findings and recommendation of the special disciplinary committee of independent directors, the board at its meeting held on July 23, 2026, concluded that the conduct of the employees involved constituted business overreach rather than any mala fide action, personal enrichment, or improper motive.
MUST READ | HDFC Bank shares may fall to Rs 675-680, ICICI Bank a better pick, says Gaurav Sharma
HDFC Bank shares have been in the spotlight this week after a group of investors alleged they were sold a high yielding third party life settlement fund as an investment opportunity between 2017 and 2019, the fund later stopped redemptions, leaving them in the lurch.
In that matter, HDFC Bank has said it had only facilitated the investments and that the onus of the fund performance and redemptions lay with that fund house.