HDFC Bank moves to calm governance concerns; RBI too assures stability

HDFC Bank’s management firmly pushed back concerns about governance and internal rift within the bank following the sudden resignation of part-time chairman Atanu Chakraborty, with the bank’s interim chairman Keki Mistry stating the resignation will not impact  the bank’s operations or financial health.

The resignation triggered a sharp reaction in the markets, with the bank’s shares falling up to 8.5%, but recovered part losses after the management call and now trading 4.5% lower from yesterday’s close.

The resignation led to concerns with the market fretting over the deeper governance issues as Chakraborty cited differences over “values and ethics”, .

In a Concall with investors , Mistry said the call was aimed at reassure about the bank’s governance framework. He said the board was not aware of any specific issues or instances of malpractice and emphasised that no material matters had been flagged before the resignation.

“I would not have taken this responsibility at the age of 71 if it is not aligning to my values and principles,” Mistry said.

He also rejected speculation about a power struggle within the institution, noting that while differences of opinion can occur in any large organisation, there was “nothing substantive” behind the exit.

"There was no power struggle in the bank, as you put it," he said, noting that while there were some internal differences, "there was nothing substantive."

Mistry also updated that the bank directors met the Reserve Bank of India soon after the resignation and the central bank approved his interim appointment quickly. The speed of the approval, he said, reflected regulatory comfort with the bank’s governance standards and the board’s handling of the situation. 

HDFC Bank’s managing director and chief executive officer Sashidhar Jagdishan said  that the lender’s growth strategy and operational trajectory remain unchanged.

The resignation, Mistry said, has “nothing whatsoever to do with operational profitability”, and the bank continues to operate with the same risk management and audit systems that have defined its governance track record over the years.

RBI steps in with formal assurance
The central bank also issued a formal statement after the development. The RBI said it had taken note of the recent developments and approved a transition arrangement for the position of part-time chairman as requested by the bank.

Importantly, the RBI emphasised that HDFC Bank remains a domestic systemically important bank with sound financials, a professionally run board and a competent management team. It added that, based on its periodic assessments, there are no material concerns on record regarding the bank’s conduct or governance.

The statement also highlighted that the lender remains well-capitalised, with a satisfactory financial position and adequate liquidity, and said the RBI will continue to engage with the board and management going forward.