HDFC Bank: The bank has taken action against at least 12 senior and mid-level executives, stopping their increments and cancelling employee stock options (ESOPs).

HDFC Bank takes action against 12 officials

HDFC Bank: Following the sudden resignation of former chairman Atanu Chakraborty, HDFC Bank is once again in the headlines. The bank has taken strict action against 12 of its executives, who are accused of mis-selling Credit Suisse Additional Tier-1 (AT1) bonds.

As a result, the bank has taken action against at least 12 senior and mid-level executives, withholding their increments and canceling employee stock options (ESOPs). Among those being prosecuted is Ashish Parthasarathy, group head of branch banking, payments, treasury, liability products, and marketing. This latest action is part of a series of accountability actions taken by the bank in connection with the AT1 bond controversy.

What is the matter?

Some HDFC Bank officials colluded to sell AT1 bonds from a foreign bank called Credit Suisse to NRIs (Indians living abroad) through their branches in Dubai and Bahrain. The case dates back to 2023. The officials assured customers that these bonds were safe and would provide fixed-term returns, just like an FD. However, the reality was quite different.

In fact, these bonds are quite risky, and if the bank were to collapse for some reason, the value of the bonds would become zero, and all the money invested in them would be lost. This is exactly what happened. In March 2023, Swiss authorities reduced the value of Credit Suisse's AT1 bonds to zero as part of the emergency takeover of Credit Suisse by UBS. This resulted in the loss of millions of rupees of customers who had invested in the bonds. Customers accused the bank officials of deceiving them and selling them risky investments.

What did the bank say?

The bank's CEO, Shashidhar Jagadeesan, clarified the matter, stating that this was not fraud, but rather a technical error in understanding the rules. The bank's action aims to send a message that if you sell investments to customers using false information, the bank will not spare you. In light of this action, the bank's Dubai branch has banned new customer additions. Salary hikes for 12 officials have been halted, and their stock options have also been revoked.