Largecap bank stock crashes after receiving warning letter from SEBI for regulatory non-compliance

During Thursday’s trading session, the shares of an Indian banking and financial services company and India’s largest private sector bank by assets fell by around 1.2 percent on BSE, after the Securities and Exchange Board of India (SEBI) issued a warning letter in relation to custodian activities.

Price Movement

With a market capitalisation of Rs. 13.72 lakh crores, at 01:14 p.m., the shares of HDFC Bank Limited were trading in the red at Rs. 1,792.5, down by around 0.3 percent, as against its previous closing price of Rs. 1,797.4. The stock has delivered positive returns of around 21 percent in one year, as well as over 5 percent returns in a month.

What’s the News

According to the latest exchange filings, the Securities and Exchange Board of India (SEBI) has issued an administrative warning letter to HDFC Bank, citing certain alleged non-compliances concerning Custodian activities being carried out by the Bank in terms of SEBI (Custodian) Regulations, 1996.

Details of the Violation: After inspecting the bank’s custody activities, SEBI found certain regulatory discrepancies and issued a warning letter for non-adherence to specific guidelines applicable to Custodians. HDFC Bank has clarified that the issue will not have any financial, operational, or other quantifiable monetary impact.

What Are Custodian Activities?

Custodian activities refer to services provided by the bank to institutional investors, insurance companies, mutual funds, foreign portfolio investors (FPIs), and other market participants. These services include safekeeping of securities, settlement of trades, corporate action processing, securities pricing, comprehensive recordkeeping & reporting, and compliance with regulatory guidelines.

Essentially, HDFC Bank acts as a custodian by ensuring secure storage and efficient management of financial assets on behalf of its clients. These services are designed to secure storage and efficient management of financial assets on behalf of its clients, whether in electronic or physical form, utilizing advanced technologies and secure vaults. HDFC Bank’s custodial services are compliant with the Sarbanes-Oxley Act (SOX) and ISO 9001:2015 standards, reflecting their high operational standards.

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Financial Performance

HDFC Bank reported a decent growth in net interest income (NII), experiencing a year-on-year increase of nearly 9.7 percent, rising from Rs. 34,765 crores in Q3 FY24 to Rs. 38,125 crores in Q3 FY25. Similarly, during the same period, the bank’s net profit increased from Rs. 17,718 crores to Rs. 18,340 crores, representing a marginal growth of around 3.5 percent YoY.

About the Company

HDFC BANK Limited is a publicly held banking company engaged in the business of providing a range of banking and financial services, including retail banking, wholesale banking and treasury operations. The Bank has overseas branch operations in Bahrain, Hong Kong, Dubai and an Offshore Banking Unit at the International Financial Service Centre (IFSC), GIFT City, India.

Written by Shivani Singh

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