HDFC Bank's Chairman Resigns Amid Governance Concerns

Some of the country’s top legal experts and proxy advisory firms have flagged concerns over the sudden resignation of Atanu Chakraborty, the part-time chairman of HDFC Bank , on Wednesday, saying it leaves more questions than answers. Chakraborty, a retired bureaucrat, stepped down from his position, citing differences with the lender, which he said were “not in congruence with his personal values and ethics”. The bank appointed group insider Keki Mistry as interim chair, confirming its stability and operational soundness on Thursday. “The RBI and SEBI should question him (Chabraborty) to understand what were the issues that drove him to take such a step. The resignation is vague and does not provide any instances of misalignment. The regulators should ask him why he chose to do this,” HP Ranina, senior advocate, Supreme Court and corporate lawyer, told FE. In his resignation letter, Chakraborty, who joined the board of HDFC Bank in May 2021, pointed to “certain happening and practices within the bank” without specifying what they were. In an analysts’ call on Thursday, the lender said it remained confused about the resignation, though speculation has been growing in industry circles of a likely rift between Chakraborty and the executive leadership of the bank, prompting the former to step down from his position. Shriram Subramanian, founder and MD of proxy advisory firm InGovern, said issues, if any, should have been spelt out clearly. “By not doing so, a great disservice has been done to shareholders. The board should constitute a committee of independent directors to investigate the matter and put out a note to assuage investors,” he said. But Paras K Parekh, partner at legal firm CMS IndusLaw, said that unless something specific emerges from a regulatory or internal probe, it would be hard to claim governance lapses. However, Amit Tandon, chief executive, Institutional Advisory Services, a proxy advisory firm, said that governance uncertainty could erode trust in the long run. “The RBI should be on top of the issue as HDFC Bank is a systemically important bank,” he said. On Thursday, the central bank said that HDFC Bank had no major governance issues in a move to reassure investors. “The bank should continue to address risks meaningfully and remain engaged with the banking regulator,” Vivek Iyer, partner and financial services risk leader, Grant Thornton, said.