HDFC Bank investigates its vehicle financing business

HDFC Bank on Monday said it was looking into alleged improper lending practices in its vehicle financing arm involving the auto lead head Ashok Khanna.

The bank denied an extension to Khanna, who stepped down in March after spending 18 years with the bank, Bloomberg reported.

The nature of the allegations could not be ascertained, but the bank confirmed that it was looking into the complaint and was following due processes.

“We’d like to state that the executive concerned who was on an extension of service retired on 31 March in the normal course of his employment. The bank has a well established process of investigating every complaint that it receives and takes actions as appropriate. In the said instance as well, the bank has followed the due process. We’d like to take the opportunity to reiterate that the bank has upheld the highest standards of governance and propriety at all times,” said an HDFC spokesperson.

The Bloomberg report linked Khanna’s exit to “an internal audit of the bank’s vehicle-dealer lending, as well as allegations of conflicts of interest in the purchase of global positioning systems for vehicles financed by the bank”.

Khanna, who was 63 at the time of leaving the bank, had been receiving extensions since 2017, the report said. HDFC Bank’s vehicle lending business comprises roughly 10% of the total loan book. In the six years to 31 March, the vehicle loan book had grown from ₹34,794 crore to ₹84,000 crore, as per RBI’s reporting guidelines.

At the end of the March quarter, HDFC bank had reported a 17.7% rise in net profit to ₹6,928 crore, against ₹5,885 crore in the year-ago period. Provisioning rose to ₹3,784.5 crore against ₹3,043.6 crore in the previous quarter and ₹1,889 crore in the year-ago period. The bank had made additional provisions of ₹1,550 crore because of the covid-19 impact.

HDFC Bank aims to raise ₹50,000 crore by way of additional tier 1 and tier 2 bonds besides long-term bonds for financing its infrastructure and affordable housing business. It also aims to raise another ₹10,000-13,000 crore by the end of 2020 and is in the process of appointing investment bankers for the same.

On Monday, HDFC Bank lost 2.26% to close at ₹1,080.40 on the BSE, while the benchmark index, Sensex, gained 0.27% to 36,693.69.