HDFC Bank slides 3% on report of improper lending in vehicle finance unit

"The result of the investigation followed issues thrown up by an internal audit of the bank's vehicle-dealer lending, as well as allegations of conflicts of interest," the report said

Shares of HDFC Bank slipped 3 per cent to Rs 1,071.2 on the BSE on Monday after a Bloomberg report alleged that the bank was probing allegations of improper lending practices and conflicts of interests in its vehicle-financing operation.

"The result of the investigation isn’t public, but it followed issues thrown up by 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," the report said quoting unnamed sources. 

At the Centre of the enquiry is Ashok Khanna, an 18-year veteran at the bank. The vehicle financing unit he headed had outstanding loans of more than Rs 1.2 trillion as of March 31, Bloomberg reported.

A spokesman for HDFC Bank confirmed to Bloomberg that there had been an investigation into the vehicle-financing unit but declined to give details.

"HDFC Bank’s management had been discussing a proposal for Khanna to stay on as the unit’s head for six months until October, to ensure continuity ahead of the retirement later this year of longstanding Managing Director Aditya Puri, according to the people. After the investigation, Khanna retired at the end of March in line with his contract, they added.

At 2:14 pm, the stock was trading 2.43 per cent lower at Rs 1,078.5 apiece on the BSE as against 27 points, or 0.08 per cent, rise in the S&P BSE Sensex at 36,621.86. The stock was the biggest loser on the Nifty Bank index. The Nifty Bank index was down 1.3 per cent at 22,108.30 level, having hit an intra-day low of 21,981.65.