HDFC Bank probes lending practices at vehicle-financing operation

The bank decided against proceeding with an earlier proposal to extend the employment of Ashok Khanna, an 18-year veteran at the bank, after the investigation was completed.

HDFC Bank has conducted a probe into allegations of improper lending practices and conflicts of interests in its vehicle-financing operation involving the unit’s former head, according to people familiar with the matter.

The bank decided against proceeding with an earlier proposal to extend the employment of Ashok Khanna, an 18-year veteran at the bank, after the investigation was completed, said the people, who asked not to be identified as the information remains confidential. The vehicle financing unit he headed had outstanding loans of more than Rs 1.2 trillion ($16 billion) as of March 31.

HDFC Bank’s management had been discussing a proposal for Khanna to stay on as the unit’s head for six months until October. Khanna retired at the end of March in line with his contract, they added.

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 people said, without disclosing what the probe uncovered.

HDFC Bank fell 2.3 per cent on Monday and its parent Housing Development Finance fell 2.1 per cent, among the three worst performers on the Sensex that gained 0.3 per cent.

A spokesman for HDFC Bank confirmed there had been an investigation into the vehicle-financing unit but declined to give details. In an emailed statement, he said Khanna had retired in March in line with the terms of his employment contract.

“The bank has a well-established process of investigating every complaint that it receives and takes actions as appropriate,” the spokesman said in the email.