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The troubles of HDFC Bank, the biggest giant of the Indian stock market and the heavyweight of the banking sector, seem to be increasing continuously. The news of a securities fraud class-action lawsuit being filed against the bank and its top leadership in a United States (US) court saw strong selling in bank shares in the domestic market on Thursday. Shares of HDFC Bank fell to its new 52-week (one year) low of Rs 710 due to heavy selling on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
The massive fall wiped off nearly Rs 25,000 crore from the bank’s market capitalization (M-cap) in a single trading session alone, causing the total market valuation of the bank to slip below the Rs 11 lakh crore mark.
The class-action lawsuit has been filed by Jwalant Natwarlal Soneji, an American investor, in the US District Court for the Southern District of New York. In this legal complaint, along with the bank, its Managing Director and Chief Executive Officer (MD & CEO) Shashidhar Jagadeesan and Chief Financial Officer (CFO) Srinivasan Vaidyanathan have also been made direct parties.
The lawsuit has been brought on behalf of all global investors who purchased American Depositary Shares (ADS) of HDFC Bank between July 17, 2023 and May 26, 2026. The complaint alleges that the bank’s management made misleading statements to investors and the U.S. Securities and Exchange Commission (SEC) and concealed material financial and regulatory risks. The petitioner has demanded a jury trial in the case and compensation for the huge financial loss suffered by the investors.
The root of the US lawsuit is an old case related to Maharashtra State Road Development Corporation (MSRDC). According to the allegations, the bank had promised an exorbitant interest rate of 6.01 per cent against the standard 3.5 per cent savings rate to attract large deposits of MSRDC.
Due to banking norms prohibiting paying interest beyond the prescribed limit to a single institutional customer, the excess interest amount of Rs 45 crore was allegedly shown as marketing expenses for road safety awareness campaigns through third party vendors.
After the report of this internal investigation became public in May this year, there was a huge fall in the American shares of the bank. However, HDFC Bank’s board of directors in July, based on a special disciplinary committee investigation, considered it to be ‘business overreach’ rather than any ill-will or personal gain and imposed a token fine on top executives.
Giving official response to the US lawsuit, HDFC Bank said that this lawsuit is completely baseless and merit-less. According to a bank spokesperson, it is very common for such shareholder suits to be filed in the US whenever the share price of a listed company falls, and many global companies regularly defend such cases legally.
The bank has made it clear that it will vigorously defend its financial integrity and transparency in the US court. Bank experts say that the possibility of this lawsuit having any direct material impact on the bank’s daily financial operations and core revenue is extremely limited.
There has been pressure from many sides on the shares of HDFC Bank for the last few months. In March this year, the bank’s part-time chairman Atanu Chakraborty unexpectedly resigned, saying some of the bank’s practices were not in line with his personal values and ethics. Even after his resignation, a huge fall in the bank’s shares was seen.
Additionally, over 75 NRI investors who invested in Carlyle’s Life Settlement Fund through the bank’s Dubai International Financial Center (DIFC) operations have also approached the Prime Minister’s Office (PMO) and foreign regulators alleging mis-selling and stalled redemptions. These continuous controversies have had a negative impact on the sentiment of institutional investors.
According to technical analysts, the stock of HDFC Bank has slipped below its important weekly support zone of Rs 725-720. The Relative Strength Index (RSI) is approaching the 30 level, indicating strong selling pressure from bears. Technical analysts believe that if the stock does not recover, the next important support could be in the range of Rs 685-680.
On the other hand, global and domestic brokerage houses such as Goldman Sachs, Nomura and Motilal Oswal have maintained ‘Buy’ ratings on the stock given the attractive valuations. Analysts believe that the stock will see a sustainable rise only after legal clarity and margin improvement in the coming quarters.