Big bump from HDFC Bank! Increment of 12 senior executives stopped, Employee Stock Option cancelled; What exactly is the case?

• In the banking sector, HDFC Bank is once again in the limelight
• Sudden resignation of Atanu Chakraborty, former chairman of the bank
• Strict action was taken against 12 officers

HDFC Bank: HDFC Bank has once again come into the limelight in the banking sector amid huge global turnover. The main reason for this is the sudden resignation of Atanu Chakraborty, former chairman of the bank. In particular, the bank has taken strict action against 12 of its officers. But why was this major action taken “text-align: justify;”> Diesel Price Hike : Dad! Diesel directly cost Rs 28; Now the big scissors will fit in the common man’s pocket

Increment of 12 senior officials stopped

The officials have been charged with mis-selling Credit Suisse’s ‘Extra Tier-1’ (AT1) bonds. As a result, the bank has taken disciplinary action against at least 12 senior and mid-level executives. Under this action, their annual increments have been stopped. Their ‘Employee Stock Options’ i.e. ESOPs have been cancelled. Ashish Parthasarathy, Group Head of ‘Branch Banking, Payments, Treasury, Liability Products and Marketing’, is among the officials who have been prosecuted. This action is taken as part of the accountability measures taken by the bank due to the controversy related to AT1 bonds.

What exactly is the case?

AT1 bonds, issued by a foreign bank namely ‘Credit Suisse’, were sold to Resident Indians (NRIs) from the bank’s branches in Dubai and Bahrain, together with some officials of HDFC Bank. This incident happened in 2023. These officials assured the customers that these bonds are very safe investments and ‘just like fixed deposits’ i.e. FDs, their principal investment amount will be returned on a fixed maturity date. However, the reality was completely different.

The investment risk is very high

Actually, the risk involved in investing in these bonds is very high; If the bank issuing the bonds falls into financial distress for any reason, the value of these bonds quickly falls to zero and, as a result, the entire capital of the investors is lost. This is exactly what happened in this case. In March 2023, the emergency acquisition of ‘Credit Suisse’ was done by ‘UBS’ bank. As part of this process, the Swiss authorities wrote down the value of Credit Suisse’s AT1 bonds. As a result, customers lost crores of rupees invested in these bonds. After this, the aggrieved customers accused the bank officials of misleading the customers into buying a very risky investment product. And that’s why the case turned.

What does the bank say on this?

Commenting on the entire matter, the bank’s Chief Executive Officer (CEO) Sasidharan Jagadeesan clarified that the matter is not of any kind of fraud. A ‘technical error’ caused by misinterpretation of regulatory rules. But this action should send a clear message to the bank that if you give misleading information to customers while selling investment products, the bank will never forgive you. In the wake of this action, the bank has banned adding new customers to its Dubai branch. Due to this, the pay increments of 12 officers have been withheld and their ‘stock options’ have also been cancelled.

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