HDFC Bank News: 3 US Law Firms Investigate Allegations Linked to MSRDC Payments

24 Jul 2026 , 09:06 AM

India’s largest private sector lender, HDFC Bank, has witnessed intense selling pressure over the past week, with its shares declining 7.55% amid disappointing Q1 FY27 earnings and fresh legal scrutiny in the United States. Investor sentiment weakened after three US law firms launched investigations into alleged violations of federal securities laws, adding to concerns over slowing profitability and margin pressure.

From ₹808.30 apiece on July 17, 2026, HDFC Bank shares fell to ₹747.25 on July 23, 2026, marking a decline of ₹61.05 or 7.55% in just one week.

HDFC Bank Under US Legal Scrutiny

HDFC Bank has come under the scanner after three US law firms announced investigations into whether the bank violated US federal securities laws.

The firms conducting the investigations are:

• Law Offices of Howard G. Smith
• Law Offices of Frank R. Cruz
• Glancy Prongay Wolke & Rotter LLP

The investigations are currently at a preliminary stage and are seeking shareholders who may have suffered losses following the sharp decline in HDFC Bank’s American Depositary Receipts (ADRs).

Allegations Related to Maharashtra State Road Development Corporation

The investigations stem from allegations that HDFC Bank disguised approximately ₹45 crore in payments made to the Maharashtra State Road Development Corporation (MSRDC) as marketing expenses.

According to media reports, the payments were allegedly intended to attract large deposits from the state agency. Internal records reportedly suggested that the approvals took place in the presence of Managing Director and CEO Sashidhar Jagdishan.

HDFC Bank has categorically denied all allegations, stating that it maintains robust internal governance, audit, and compliance processes. The lender also rejected any assumptions of wrongdoing based on selective information.

RBI Finds No Material Governance Concerns

Despite the allegations, the Reserve Bank of India (RBI) has reiterated that it found no material governance concerns after reviewing the bank’s records.

RBI Governor Sanjay Malhotra stated that the central bank did not identify any significant governance issues during its review, providing some reassurance to investors.

Previous Governance Concerns Added to Investor Worries

Investor sentiment had already been impacted earlier this year after former Chairman Atanu Chakraborty resigned in March 2026, citing certain practices that conflicted with his personal values and ethics.

Combined with the latest legal investigations, these developments have kept governance concerns in focus.

HDFC Bank Q1 FY27 Results

HDFC Bank reported a mixed set of quarterly earnings for the first quarter of FY27.

Key Financial Highlights

• Net Profit increased 5% YoY to ₹19,060 crore
• Net Interest Income (NII) rose 7% YoY to ₹33,530 crore
• Average Deposits grew 13.3% YoY to ₹30.1 lakh crore
• Average CASA Deposits increased 11.2% YoY
• Gross Advances expanded 15.4% YoY to ₹30.61 lakh crore
• Gross NPA stood at 1.17%, compared with 1.15% in the previous quarter

While earnings remained positive, investors were disappointed by weaker profitability metrics and margin trends.

Key Concerns in Q1 FY27

Several factors weighed on investor confidence following the quarterly results:

• Net Interest Margin (NIM) declined to 3.40%, falling 13 basis points sequentially.
• Liquidity Coverage Ratio (LCR) remained relatively low at 115%.
• Credit-Deposit Ratio stayed elevated at around 96%, limiting room for faster loan growth.
• Analysts highlighted weaker asset yields and elevated funding costs as key challenges going forward.

These factors triggered heavy selling immediately after the earnings announcement.

HDFC Bank Share Price Performance

The stock has remained under pressure throughout the week.

Daily Closing Performance

Date	Previous Close (₹)	Close (₹)	Change
17 Jul 2026	808.30	819.60	+1.40%
20 Jul 2026	819.60	777.60	-5.12%
21 Jul 2026	777.60	761.45	-2.08%
22 Jul 2026	761.45	753.15	-1.09%
23 Jul 2026	753.15	747.25	-0.78%

Overall, HDFC Bank lost ₹61.05 per share, translating into a 7.55% decline during the week.

The biggest single-day fall came on July 20, when the stock dropped 5.12% after investors reacted negatively to the Q1 FY27 results.

ADR Also Witnesses Sharp Selling

HDFC Bank’s American Depositary Receipts (ADRs), listed on the New York Stock Exchange, also came under pressure.

Following the quarterly earnings, the ADR declined 10.54% to $23.60, reflecting weak global investor sentiment.

Earlier, after reports regarding the alleged MSRDC payments surfaced in May 2026, the ADR had already fallen 4.1%, prompting the US law firms to begin shareholder investigations.

Why HDFC Bank Shares Are Falling

The recent correction in HDFC Bank shares has been driven by multiple factors:

• Disappointing market reaction to Q1 FY27 earnings
• Sharp compression in Net Interest Margin (NIM)
• Elevated Credit-Deposit Ratio limiting growth
• Preliminary investigations by three US law firms
• Allegations surrounding ₹45 crore payments to MSRDC
• Continued governance-related concerns despite RBI’s reassurance
• Weak sentiment reflected in both domestic shares and ADR performance

Conclusion

HDFC Bank remains one of India’s strongest private sector lenders with healthy growth in deposits, advances, and earnings. However, weaker-than-expected margins, concerns over future loan growth, and legal scrutiny in the US have significantly affected investor sentiment.

The stock has corrected 7.55% within a week, while its ADR has also experienced sharp declines. Going forward, investors are likely to closely monitor the progress of the US investigations, management’s response to governance concerns, and the bank’s ability to improve profitability and margins over the coming quarters.

 

Disclaimer – The stock/s and indices mentioned in this article is discussed solely for informational and educational purposes. It should not be construed as investment advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult a financial advisor before making any investment decisions. Investments in securities market are subject to market risks. Read all the related documents carefully before investing.