According to a report by Mint, HDFC Bank has initiated strict internal measures after discovering that some employees facilitated the creation of temporary deposit accounts at the end of the quarter. The aim was to inflate deposit figures using unutilised working capital limits from business clients, thereby artificially improving the bank’s financial position in regulatory and investor disclosures.
An internal email circulated towards the end of March outlined these concerns, citing the use of CASA/TD (current account, savings account/term deposit) entries created through CCOD (cash credit and overdraft) limits. These were reportedly done without “observable business logic or requirements.”
Banks often extend working capital support to businesses through CCOD facilities. These facilities give businesses flexible access to credit, which they can draw down based on operational needs. However, as per the Mint report, some relationship managers requested clients to transfer unused CCOD funds into their bank accounts just before quarter-end.
This manoeuvre temporarily bolstered the bank’s total deposit figures. Within two to three days after the quarter closed, these funds were typically reversed. Customers were charged minimal interest, and branches reportedly compensated clients through incentives, neutralising the financial impact.
The relationship dynamics between bank officials and corporate clients play a crucial role in such transactions. A senior consultant quoted in the Mint article explained that customers often find it difficult to say no to such requests due to their reliance on banking relationships and ongoing credit needs.
These end-of-quarter “window dressing” tactics have existed in the banking industry for years. While not outright illegal in all cases, they raise significant concerns about ethical banking practices, particularly when deposit figures are portrayed as genuine growth rather than temporary inflows.
Read More: HDFC Bank Share Price Hits 52-Week High Ahead of Q4 Results.
Temporary deposits can have a ripple effect across various financial metrics. They may:
However, these advantages are short-lived and can lead to significant misrepresentation of the bank’s financial health. Over time, repeated use of such practices could trigger scrutiny from regulators, damage institutional credibility, and even result in monetary penalties or operational restrictions.
The internal communication reviewed by Mint made it clear that HDFC Bank disapproves of such conduct. Employees were warned of “necessary staff action” for non-compliance, and supervisors were instructed to actively counsel staff to avoid engaging in such practices.
A spokesperson from HDFC Bank confirmed that disciplinary actions had already been initiated against those involved. The bank is also conducting sensitisation programmes across branches to reinforce ethical banking standards and ensure all employees understand and adhere to compliance norms.
This episode serves as a reminder of the pressures banks face in maintaining quarterly performance metrics, especially in competitive markets. However, it also underscores the importance of internal governance, transparency, and ethical conduct in preserving stakeholder trust.
HDFC Bank’s swift response to address the issue and enforce corrective measures reaffirms the importance of maintaining regulatory integrity within the Indian banking system.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Apr 30, 2025, 1:26 PM IST
Team Angel One
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