No material concerns regarding HDFC Bank's conduct or governance, says RBI as lender's part-time chairman resigns

No material concerns regarding HDFC Bank's conduct or governance, says RBI as lender's part-time chairman resigns

• RBI finds no major issues with HDFC Bank's conduct or governance
• HDFC Bank part-time chairman resigns citing ethical differences
• Keki Mistry appointed interim part-time chairman for three months

Did our AI summary help?

Reserve Bank of India on March 19 said there are "no material concerns" regarding HDFC Bank's conduct or governance amid resignation of part-time chairman Atanu Chakraborty over ethical differences.

RBI said the lender "remains well-capitalised".

"The Reserve Bank has taken note of the recent developments in HDFC Bank. A transition arrangement as requested by the Bank has been approved by Reserve Bank as regards the position of Part Time Chairman of the Bank.

"HDFC Bank is a Domestic Systemically Important Bank (D-SIB) with sound financials, professionally run board and competent management team. 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," said RBI in a statement.

HDFC Bank said late on Wednesday that its part-time chairman, Atanu Chakraborty, had resigned citing differences with the lender over "values and ethics", and appointed insider Keki Mistry as interim part-time chairman.

"Certain happenings and practices within the bank, that I have observed over last two years, are not in congruence with my personal values and ethics," Chakraborty said in his resignation letter, without elaborating.

"The RBI should be on top of the issue as HDFC Bank is a systematically important bank. But since the RBI has appointed a group insider Keki Mistry in his place it could mean less alarm for shareholders" Amit Tandon, chief executive, Institutional Investor Advisory Services, a proxy advisory firm told Reuters.

Former bureaucrat Chakraborty was appointed as part-time chairman in April 2021 for a three-year term and reappointed in May 2024 through May 4, 2027.

During his tenure, HDFC Bank merged with housing finance firm HDFC Ltd in a $40 billion deal, creating a financial services behemoth.

In his resignation letter, Chakraborty noted that benefits of the 2022 merger were "yet to fully fructify".

The RBI has approved the appointment of long-time group insider Keki Mistry as an interim part-time chairman for three months, effective March 19, the bank said in its exchange filing.

"While (Chakraborty's resignation) letter does not allege specific misconduct, perception alone can weigh on sentiment until credible steps are outlined and delivered," Anuj Singla, analyst at J.P.Morgan told Reuters.

"In our view, this could widen the governance risk premium embedded in the shares," Singla said.