Shares of HDFC Bank declined over 0.2 percent from the previous close at Rs 1,077.15 on Friday before paring losses after media reports informed that US-based Rosen Law Firm and Schall Law Firm have filed class-action suits against the private lender on alleged misleading public statements and failure to inform investors of improper internal controls on vehicle loans.
Shares of the bank closed lower by Rs 10 per share on Thursday.
Last month, Rosen Law, a global investor rights law firm had informed on its website that it was preparing for the class-action suit on behalf of investors of HDFC Bank and asked those who have purchased securities of the bank to join the action.
Explaining the allegation, the law firm on its website explained that on 13 July 2020, The Economic Times reported that HDFC Bank had "conducted a probe into allegations of improper lending practices and conflicts of interests in its vehicle-financing operations involving the unit's former head." Consequently, HDFC Bank's American depositary receipt price fell $1.37 per share, or 2.83 percent, to close at $47.02 per share that day.
Further, the improper lending practices charges include the bank's executives forcing borrowers to buy GPS devices bundled with auto loans, according to media reports. Rosen Law further alleged that on 19 July 2020, when HDFC Bank reported its financial results for the June ended quarter, the results were missing analyst estimates with respect to net profit and reporting a deterioration in its asset quality.
Then, on 6 August 2020, The Print reported that in July 2020, Experian Plc's Indian unit had informed the Reserve Bank of India that "HDFC Bank has been late in providing details of its loans, including the repayment status of its millions of retail borrowers" and that "[s]uch tardiness has been an issue for about two years."
Rosen Law has filed the suit on 14 September on behalf of investors who purchased HDFC Bank securities between 10 July 2020 and 31 July 2020. Schall Law filed the suit on 8 September pertaining to the same investment period.