India’s largest private lender by assets enlisted Mumbai-based Trilegal and Wadia Ghandy & Co following Atanu Chakraborty’s resignation as chairman in March, citing a perceived ”incongruence” between his personal values and the bank’s practices. He did not provide further details.
Following the Reuters report, HDFC Bank shares rose by as much as 3.1% to ₹796.95, before settling slightly lower with a 2.9% increase at 0930 GMT. Prior to the report, shares were approximately 1.8% higher.
Chakraborty’s resignation triggered a 13.81% decline in the bank’s share price, equating to a $16 billion loss in market value, and prompted an unusual statement from the central bank to reassure investors and depositors regarding a financial institution viewed as too significant to fail.
It also cast doubt on the bank’s application for the central bank approval by the end of May to reappoint CEO Sashidhar Jagdishan.
The situation revealed strains in leadership at HDFC, a bank predominantly owned by foreign institutional investors, facing criticism for its stock, which has declined 5% since a $40 billion merger with parent company HDFC Ltd in 2023. In contrast, its nearest competitor ICICI Bank has gained 33% during the same period, while the benchmark Nifty 50 index is up 24%.
With 120 million customers and controlling over 10% of banking deposits, a favorable assessment from the law firms would provide reassurance to a bank crucial for economic stability.
The law firms reviewed minutes and video recordings from board and extraordinary general meetings over the past three years to determine if Chakraborty had raised governance concerns and how those concerns were managed, said the sources, who requested anonymity as the findings are not public.
All issues raised at the board level were addressed according to established processes, one source indicated, without providing further elaboration.
The law firms are anticipated to present their findings to the board this month, who will subsequently forward the information to the central bank, the individual added.
The review’s findings have not been previously disclosed.
Chakraborty did not respond to texted inquiries from Reuters. HDFC Bank, the Reserve Bank of India, Trilegal, and Wadia Ghandy & Co did not reply to emailed requests for comments.
BANK SET TO PROPOSE CEO REAPPOINTMENT
The resignation and ensuing review have postponed a board decision regarding recommending Jagdishan for reappointment as CEO after his three-year term concludes in October. The central bank has the authority to approve CEO appointments for lenders.
HDFC Bank will suggest Jagdishan for reappointment once the law firms finalize their report, the second source noted.
The central bank believes there are no issues that could hinder the reappointment, according to a third individual familiar with the RBI’s perspective. Should the review align with this view, the RBI is expected to support the reappointment, the person stated.
Following Chakraborty’s resignation, the central bank stated that, based on its periodic assessments, ”there are no material concerns on record regarding its conduct or governance”.
Proxy advisor InGovern Research Advisory Services indicated last month that the resignation appeared to stem from personal motivations rather than any risk to shareholder value.
