HDFC Bank Receives SEBI Warning; Second Letter In Just A Week - What's The Matter?

HDFC Bank has come under scrutiny again, receiving its second warning letter from the Securities and Exchange Board of India (Sebi) within a week. The latest notice pertains to non-compliance with disclosure regulations regarding the resignation of a senior management employee, Arvind Kapil.

Sebi flagged a three-day delay in reporting Kapil's resignation to stock exchanges and the bank’s failure to provide an explanation for the delay. The regulator, in its administrative warning, stressed the seriousness of the violation and advised the bank to avoid such lapses in the future.

"The above violation has been viewed seriously. You are therefore warned to exercise due caution in future and avoid recurrence of such instances, failing which appropriate enforcement action may be initiated," Sebi stated in its letter.

Corrective steps initiated

In its response to the exchanges, HDFC Bank acknowledged Sebi’s warning and assured that corrective measures would be implemented. The bank has shared the communication with its Board and confirmed its commitment to compliance with regulatory directives.

HDFC Bank clarified that the warning has no financial or operational implications. Despite the recent scrutiny, the bank continues to perform strongly, supported by a robust balance sheet and post-merger synergies with HDFC.

This marks the second instance of SEBI action against HDFC Bank in a short span. Earlier, on December 12, Sebi had issued another administrative warning based on observations during its periodic inspection of the bank’s investment banking operations.

In that notice, Sebi flagged non-compliance with several key regulatory provisions, including the SEBI (Merchant Bankers) Regulations, 1992, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and SEBI (Prohibition of Insider Trading) Regulations, 2015.

 The letter specifically alleged lapses in adhering to mandatory processes in investment banking activities and raised concerns over the bank’s ability to ensure robust compliance protocols.

Two warnings in quick succession indicate heightened regulatory scrutiny on the bank’s operations.