HDFC Bank chairman quits in sudden move

Mumbai: Atanu Chakraborty on Wednesday resigned as non-executive chairman of HDFC Bank with immediate effect, citing concerns over "internal practices", in a development that could raise fresh questions over governance at a systemically important institution.

In a regulatory filing, the bank said Chakraborty, a retired civil servant, had stepped down as part-time chairman and independent director. The former economic affairs secretary joined the board in May 2021 and served as chairman through a period that included merger of HDFC with the bank. HDFC said RBI has okayed appointment of Keki Mistry as interim part-time chairman for 3 months, effective Thursday.

The merger, under Chakraborty’s watch, created a financial conglomerate and made HDFC Bank the second largest lender in the country, according to his resignation letter.

The bank said Chakraborty had resigned, stating that “certain happenings and practices within the bank… are not in congruence with my personal values and ethics,” and also clarified that there were no other material reasons for his resignation.

His exit comes as a surprise given that he had been reappointed with RBI approval for a term extending to May 2027, underscoring the abrupt nature of the move at a bank that accounts for about 15% of the country’s deposits and is seen as critical to financial stability. The board placed on record its appreciation for Chakraborty’s contribution during his tenure. The language in his resignation letter is likely to draw regulatory and investor attention to governance standards and internal controls at one of India’s most closely watched financial institutions.

Chakraborty has not mentioned the exact issues that triggered his resignation. American Depository Receipts of the bank traded in the US markets were 2.2% down after the announcement. While HDFC Bank has a 15% share of bank credit, its share of digital payments, particularly credit cards, home loans and other products is disproportionately higher. Those watching the developments said that given the systemic importance of the bank and the quick approval of Keki Mistry as chairman by the regulator, govt and RBI would have been aware of the development leading to Chakraborty’s resignation.

There have also been reports of differences among senior executives that may have affected coordination within the bank. Compared to his predecessor Aditya Puri, the founding MD known for his strong, centralised leadership style, the current MD and CEO S Jagadishan is very low profile.

Among the recent controversies at the bank was one around auto loans that erupted in mid-2020 over allegations of improper sales practices in its vehicle finance vertical, particularly the forced or “missold” sale of GPS tracking devices and other third party non-financial products to auto loan customers.

The issue first surfaced via social media and whistleblower complaints in June and July 2020, prompting the bank to conduct an internal probe after media reports highlighted potential conflicts of interest and employee misconduct in the auto loan division.

By late July 2020, the bank confirmed a set of employees had been terminated for “personal misconduct”. The incident later drew regulatory scrutiny from RBI, which in June 2021 fined HDFC Bank Rs 10 crore for compliance failures linked to irregularities in its auto loan book and the sale of third-party products to vehicle loan customers. In recent weeks, social media posts have raised fresh allegations of irregularities in the personal business dealings of some senior executives at the bank.

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