HDFC Saga Continues
Citibank Playbook 101: what cannot be done directly, figure out a way to do indirectly.
DNA runs deep.
“In March, HDFC Bank chairman quit citing ethics. What bank didn’t reveal: Its probe found that violating RBI, bank’s norms, Rs 45-cr extra interest was paid to Maharashtra State Road Development Corp as sponsorship for road safety drive.
These payments, The Indian Express investigation, based on internal records, has revealed, were meant for MSRDC as “differential interest” i.e., interest over and above the specified rate, on its deposits. But instead of being credited directly to MSRDC’s account as interest earned, they were routed through the bank’s marketing department, disguised as contributions to a road safety awareness campaign through four local vendors.
Significantly, records reveal that this payout was approved in the presence of HDFC Bank MD & CEO Sashidhar Jagdishan during senior-level discussions where a higher rate for MSRDC was “verbally” agreed upon. Many officials have testified in the internal probe that Jagdishan “participated in the call convened to examine how the bank could compensate MSRDC and was part of the decision to provide the differential interest through the marketing budget as a one-off arrangement.
HDFC Bank Chief Marketing Officer Ravi Santhanam acknowledged in his testimony during the Vigilance probe that the marketing department acted as a “facilitator to camouflage differential interest reimbursement as marketing spend”.
The core business strategy is to capture public funds as CASA or FDs and then to export the money or to use it to fuel the real estate and luxury consumption bubble.
There seem to be some award winning innovations here on how to do illegal acts legally.
Though the million dollar question is why someone like Keki Mistry would prostitution the reputation of Brand Parsi to hide such things. It may be so much easier to just go clean. The Tatas are realising this at great cost to both reputation and valuation. No one has killed anyone’s first born. They can just confess, pay fines, go clean and hold their head high.
Though I am still looking for the clause in the RBI Act and SEBI Act which allows them as regulators to issue character and appreciation certificates without investigation, without facts and without even so much as an enquiry.
Regulators enforce regulations. They investigate complaints. They prevent the formation of cartels, creation of monopolies and failure of market forces.
Since when and under what regulations did they start giving awards and appreciation certificates as they did for HDFC. One can vaguely argue that it was necessary to prevent a run on the bank. But of course if there is a scam or a whistleblower – the last thing on earth a regulator should be doing is to issue appreciation certificates on a sumo moto basis
This will not end in good places, given that the mainstream media has now got onto it.