HDFC board, RBI, govt enter firefighting mode

MUMBAI: A day after HDFC Bank's non-executive chairman Atanu Chakraborty resigned citing concerns over practices inconsistent with his values and ethics, regulators, the bank's board and management and the govt moved swiftly to contain a governance scare.

Seeking to steady sentiment, newly appointed interim chairman Keki Mistry struck a firm tone while addressing analysts and reporters. "Personally, I would never remain on the board if I had the slightest doubt about governance," he said. Mistry acknowledged interpersonal frictions but dismissed their significance, saying: "There were relationship issues... human beings have relationship issues... but that is not material at this point of time. Let me tell you that the board is completely cohesive." The RBI moved quickly to contain any contagion risk, stating that HDFC Bank, a domestic systemically important bank, has sound financials, a professionally run board and competent management.

"Basis our periodical assessment, there are no material concerns on record as regards its conduct or governance. The bank remains well-capitalised and the financial position of the bank remains satisfactory with sufficient liquidity. Reserve Bank will continue to engage with the board and management on the way forward." In New Delhi, financial services secretary M Nagaraju echoed this, saying: "HDFC Bank is a strong institution with strong fundamentals."

Within the bank, executives underlined continuity and introspection. MD and CEO Sashidhar Jagdishan said the board made repeated but unsuccessful efforts to elicit specifics from the departing chairman, who quit "despite every board member trying to persuade the past chairman to take back his resignation or sort of elaborate on any of the concerns that he may have which would have been addressed as they were in the past...or take back some of the language that was there in that letter."

Internal reshuffle

The episode appears to have accelerated an internal reshuffle, with Jagdishan signalling a larger role for deputy MD Kaizad Bharucha: "Kaizad will take on more responsibilities going forward." He added: "We will re-examine our organisation structure, and with the consent and advice of the board, we will announce it at the appropriate time." He also said, "Shortly we will have a very intense and cohesive engagement between the management and the board... it's going to be kind of a joint partnership that will come out at the end."

Jagdishan said no formal discussion on his own reappointment had taken place, adding that the nomination and remuneration committee would take up the matter "in the very near future".

Board members also disclosed attempts to probe the ethical concerns cited by Chakraborty. Mistry said every allegation, including anonymous social media reports, was examined through a rigorous multi-tiered oversight process. Harsh Kumar Bhanwala, chairman of the nominations and remuneration committee, outlined a structured framework where complaints are vetted by the audit committee and, if credible, routed through a formal whistleblower mechanism for "accountability fixation".

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