FIR against HDFC Bank CEO linked to Rs 65cr loan dispute, bank alleges legal abuse

Why has HDFC Bank’s CEO been named in a criminal complaint?

HDFC Bank Limited (NSE: HDFCBANK), one of India‘s leading private sector lenders and a constituent of the NIFTY 50 index, issued a strongly worded press release on June 8, 2025, refuting a First Information Report (FIR) filed against its Managing Director and Chief Executive Officer. The Indian banking major linked the FIR to a long-standing, unresolved loan default dispute involving Splendour Gems Limited, a company controlled by the Mehta family.

The bank alleged that the FIR was filed with the intent to intimidate and discredit its leadership amid legitimate recovery proceedings for dues amounting to approximately ₹65.22 crore as of May 31, 2025. The unpaid liabilities date back nearly three decades to a consortium loan granted in 1995. Despite receiving a recovery certificate from the Hon’ble Debts Recovery Tribunal in 2004, the Indian banking institution has been unable to recover the dues from the borrower despite multiple legal and enforcement efforts.

This latest complaint, filed by Lilavati Kirtilal Medical Trust—an entity linked to the Mehta family—accuses HDFC Bank’s CEO and senior officials of unspecified charges. However, HDFC Bank dismissed the allegations as “false, outrageous, and a gross misuse of the legal process.”

What is the origin of the dispute with Splendour Gems?

Splendour Gems Limited, formerly known as Beautiful Diamonds Limited, was among the borrowers under a multi-bank lending arrangement spearheaded by HDFC Bank in 1995. Over the years, the Mehta-owned enterprise failed to service its debt obligations. HDFC Bank emphasized that the dues, including interest, have grown significantly and now total more than ₹65 crore.

In 2004, a recovery certificate was granted by the Debts Recovery Tribunal, giving the lender legal authority to initiate asset recovery. Yet, despite this and additional enforcement actions, the principal and interest amounts remain unpaid.

The Mehta family, as per the Indian private sector bank’s statement, has responded with a string of counter-litigations. These include criminal complaints, minority shareholder rights petitions, and regulatory grievances—all allegedly intended to delay repayment. Most of these efforts have either been dismissed or remain under challenge in courts.

How is HDFC Bank responding to the FIR?

In its June 8, 2025, revised press release to the Bombay Stock Exchange and National Stock Exchange of India, HDFC Bank explicitly condemned the FIR as “malicious and baseless.” The lender stated that the personal attacks on its leadership were clearly intended to stall the recovery of public funds.

The bank maintained that after exhausting all legitimate avenues for defense, the borrower and associated entities have turned to filing frivolous criminal cases, particularly targeting senior executives to create reputational pressure. According to HDFC Bank, these actions constitute not only a distraction from the financial defaults but also an abuse of the judicial system.

The private sector lender reiterated its commitment to pursuing all lawful remedies to recover the dues, defending both its reputation and the integrity of its executives against retaliatory legal actions.

What are investors and market participants saying?

Despite the unfolding legal row, HDFC Bank’s share price closed higher on June 6, 2025, at ₹1,978, marking a gain of ₹28.40 or 1.46%. Trading volumes remained robust, with over 150 lakh shares exchanged during the session. The stock also hit its 52-week high of ₹1,996.30 on the same day, signaling resilience in investor sentiment.

The bank’s total market capitalization stands at ₹15.15 lakh crore, with free float market cap accounting for over ₹15.02 lakh crore. Its adjusted price-to-earnings (P/E) ratio is 20.72, while the symbol P/E remains close at 21.00. These figures reflect moderate market valuation, suggesting that institutional investors may be factoring in the bank’s strong fundamentals over transient legal uncertainties.

The daily volatility stands at 1.27 with an annualised volatility of 24.26, indicating that the stock has remained relatively stable even amidst legal headwinds.

What does this incident signal about corporate legal risk in Indian banking?

This episode highlights a growing trend where defaulting borrowers leverage criminal proceedings and legal process abuse as strategic tools against lenders. In India’s financial recovery ecosystem, such actions complicate what are otherwise civil recovery disputes. The use of FIRs to counter legitimate recovery actions is seen by many analysts as a loophole that can delay or derail creditor enforcement.

Legal experts suggest that unless backed by demonstrable evidence of criminal intent, such complaints rarely succeed in leading to prosecutions. Nevertheless, they may exert reputational pressure and distract from recovery focus, especially when filed against individuals in leadership positions of public-facing institutions.

For HDFC Bank, the reputational stakes are particularly high given its standing in the Indian financial system and its extensive domestic and global investor base. The outcome of this case could set precedent for how aggressively Indian lenders can pursue bad loans without being drawn into retaliatory litigation.

How do institutions view HDFC Bank’s corporate governance and ethical track record?

Historically, HDFC Bank has maintained high ratings for governance standards and ethical compliance. Founded in 1994 and listed since November 8, 1995, the Indian private banking institution is known for its conservative lending practices, robust internal controls, and disciplined credit underwriting.

The bank reiterated in its statement that it upholds the highest standards of ethics, transparency, and governance. It assured stakeholders that it remains committed to lawful conduct and responsible recovery practices, and will not be deterred by what it sees as desperate legal maneuvering by borrowers unwilling to meet their obligations.

The press release from HDFC Bank also emphasized that it will continue protecting its directors, officers, and employees against any attempts to subvert judicial remedies through harassment or intimidation.

What could happen next in the HDFC Bank–Mehta family case?

While the bank has confirmed the filing of the FIR, there is no immediate indication that court proceedings have begun or that law enforcement agencies have taken action on the complaint. Regulatory agencies such as the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), and the exchanges may monitor the situation closely.

Any significant developments—such as formal investigation orders or additional legal action—could impact investor confidence. For now, the Indian banking giant appears to be on stable legal and reputational footing, with market sentiment showing resilience.

Analysts expect HDFC Bank to remain focused on resolving the long-pending default through legal and financial channels. However, further escalations or media scrutiny could raise concerns among retail shareholders and compliance watchdogs, even as institutional investors may take a longer-term view.

What is the future outlook for HDFC Bank after the FIR controversy?

Despite the legal noise, HDFC Bank continues to be seen as a structurally sound financial institution with a robust loan book, healthy profitability, and a consistent dividend track record. Barring any legal escalation that directly implicates leadership in wrongdoing, market participants are unlikely to significantly alter their risk assessments.

The lender’s stock performance, capital adequacy ratios, and retail investor base remain strong, suggesting that its fundamentals can withstand short-term turbulence. However, the bank’s approach to crisis communication and legal transparency will be watched closely by analysts in the coming weeks.