HDFC Bank To Halt Mobilisation of Government Funds After MSRDC Deposit Controversy

Mumbai: HDFC Bank, India’s largest private-sector lender, has informed its direct selling agents (DSAs) and other sourcing partners that it will discontinue the mobilisation of fixed deposits (FDs), savings accounts and current accounts from government departments and government-owned entities from July 1, 2026.

The decision comes amid heightened regulatory attention over a ₹45-crore payment allegedly linked to deposits placed by the Maharashtra State Road Development Corporation (MSRDC) with the bank.

In a communication sent to its agents, the bank said a review of business generated through third-party sourcing channels had revealed that a sizeable share originated from government institutions, particularly those located in state capitals. The review also considered operational, regulatory, strategic and reputational factors associated with such business.

As part of its revised governance and business framework, HDFC Bank stated that it would no longer engage DSAs or similar intermediaries for sourcing Current Account Savings Account (CASA) and fixed deposit business from government entities.

The bank has directed all agents to stop sourcing such accounts effective July 1, 2026. It further clarified that no commissions will be paid for government-related CASA or FD business sourced after the cut-off date, including cases where such business is brought in inadvertently.

The matter came into focus after media reports cited findings from an internal vigilance inquiry into payments amounting to nearly ₹45 crore connected to deposits placed by MSRDC with HDFC Bank.

According to the reports, the payments were allegedly made through the bank’s marketing budget and recorded as sponsorship or promotional campaign expenses. The vigilance investigation reportedly concluded that the funds effectively compensated MSRDC for the difference in interest rates on its deposits, prompting regulatory scrutiny of the arrangement.