Car loan probe: HDFC Bank terminates half a dozen employees for violating the code of conduct

This termination pertains to practices at the auto loans department where some staff allegedly forced customers to buy the GPS devices bundling it with the car loan. It was found that some customers were not even aware of purchasing such a product...

Private lender HDFC Bank terminated at least six senior and mid-level executives after an internal probe revealed that they violated the code of conduct and governance standards by indulging in practices seen as corrupt, three people familiar with the matter said. This termination pertains to practices at the auto loans department where some staff allegedly forced customers to buy the GPS devices bundling it with the car loan. It was found that some customers were not even aware of purchasing such a product till the loan documents were checked.

These errant employees started forcefully bundling these products with car loans to meet sales targets and potentially track borrowers in the event of a default.

HDFC Bank has a tie-up with Trackpoint GPS to sell these devices.


HDFC Bank did not respond to a detailed questionnaire seeking comments.


“This is a bank approved product, it’s quite a minuscule portion of the banks portfolio, hardly 4000-5000 of these devices costing Rs 18,000-19,000 each were sold every month,” said an official in the know. “The gross failure for the bank has been its audit which failed to spot the misdoing.”

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HDFC Bank is the largest vehicle finance provider and books at least 50000-55000 car loans every month. It has an annual business worth at least Rs 40,000 crore. At the end of June 2020, the lender had an outstanding vehicle loan portfolio of Rs 81,082 crore against Rs 81,913 crore during the same period last year.

Speaking at the bank’s annual general meeting over the weekend Aditya Puri, the chief of HDFC Bank had denied there being any "conflict of interest".

“We had received some whistle-blowing complaints, internal enquiries carried out in the matter on the complaints received has not brought out any conflict of interest issue nor does it have any bearing on our loan portfolio,” Puri had said. "Enquiry did bring out another aspect related to personal misconduct exhibited by a set of individuals for which appropriate disciplinary actions have been taken.”

A Bloomberg report last week had suggested that Ashok Khanna, the former head of the bank’s vehicle financing business had been denied an extension after a probe was launched into its vehicle loan portfolio.

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“Ashok Khanna, being head of that business segment, had also participated in the enquiry process. Subsequently, he superannuated on 31 March, 2020 upon expiry of his tenure and as per the original terms of employment," Puri had clarified.

Khanna exclusively spoke to ET and denied all allegations against him claiming that he retired as per due process.

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“The news published of my retirement on the completion of the contract is correct, I did not have any offer of an extension, as I already had received a 3 years extension,” Khanna told ET. “There was no offer made to me which I declined. There is an attempt to malign my name and reputation by someone. I have worked for 18 yrs and created a great quality - highly profit making & envious franchise for the bank. I have always practiced zero tolerance for any malafide intent, be it channel partners or employees.“

Industry sources indicated that ICICI Bank and Axis Bank were also offering similar products, only if the customer chose to opt for it. While Axis Bank declined comment because it is in silent period, ICICI Bank clarified that only 5% of its customers purchased such a product.

“We would like to clarify that ICICI Bank does not sell any accessory while providing vehicle loans to customers,” the lender said in an email statement. “In case a customer wishes to buy an accessory, he/she has the option to seek finance from us for the product while availing the vehicle loan. We have seen that only 5% of our customers purchase a GPS tracker on finance from us on a monthly basis.”
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