'Ethical Disagreements': HDFC Ex-Chairman Opens Up On Shock Resignation

HDFC Bank Ltd.'s former chairman has shared more details following his shock resignation earlier this month, pointing to ethical qualms over how the bank tackled recent regulatory issues in Dubai as among the reasons he left.

HDFC Bank was restricted from adding new clients in the emirate after the local regulator flagged lapses last September. That ultimately led to the departures of about a dozen executives, including its former compliance officer and chief internal auditor, said Atanu Chakraborty, the former chairman.

But Chakraborty said in an interview on Monday that the bank's description of these issues as a “technical lapse” showed they don't “really add to the standards of ethics” and “these practices are not rooted in values.” He described an “incongruence” between his value framework and the bank's approach. When such a dilemma arises, it becomes a personal decision, he said.

HDFC Bank didn't immediately respond to requests for comment on the former chairman's latest remarks.

Chakraborty's comments add more detail to his surprise resignation on March 18, which sent the bank's shares tumbling and set off a round of second-guessing by analysts. Chakraborty said in his resignation letter that he had seen “certain happenings and practices” that weren't in line with his personal values or ethics.

He appeared to soften his criticism a few hours after his resignation, telling a local television he wasn't suggesting any wrongdoing at HDFC Bank. But his latest comments show he isn't willing to back down from broader claims of ethical disagreements, which have become a public headache for an Indian lender that has long been popular among international investors.

“My letter is self-explanatory,” the former bureaucrat said on Monday.

A major cause of the rift was client losses tied to risky bonds issued by Credit Suisse before its collapse, according to people familiar with the matter. The Swiss bank's so-called additional tier 1 bonds had given investors a juicy yield, but when the bonds were written down following its March 2023 rescue, high-net worth investors holding the notes faced heavy losses.
The bank's shares have lost $21 billion in value since Chakraborty resigned on March 18 but questions have lingered over what prompted the move and whether it signals deeper governance challenges.

Divergence

The former chairman stressed that his decision to resign was not driven by a single incident but the result of broader disagreements: “It was not issue-based,” he said. 

The bank has previously said its board provided Chakraborty an opportunity to present his concerns before his resignation. Chakraborty declined to comment on those assertions, reiterating that his letter adequately explained his position.

Chakraborty said he had not been contacted by either the finance ministry or regulators seeking an explanation for his letter.

The former part-time chair, who previously served as India's economic affairs secretary before joining the bank, had a tenure that coincided with one of the most transformative phases in the bank's history, following its merger with Housing Development Finance Corp. in 2023.

Chakraborty declined to say if he had independently raised concerns with supervisory authorities, calling such interactions confidential.

HDFC Bank, led by Chief Executive Officer Sashidhar Jagdishan, maintains that its governance practices remain robust. The lender has also sought to reassure investors its strategic priorities — including loan growth, deposit mobilization and integration of the merged entity — remain on track. 

India's banking regulator, the Reserve Bank of India, has also moved quickly to reassure markets, emphasizing that the lender remains well-capitalized and operationally strong. Still, the episode has cast a spotlight on boardroom dynamics at a systemically important bank.

Chakraborty said that operational and performance metrics also formed part of his assessment, adding that independent directors were obliged to evaluate not just compliance but also shareholder returns, depositor interests and overall business performance.

He said issues such as deposit growth, cost of funds and shareholder returns were also discussed at board and committee levels, noting that while the bank gained scale and balance-sheet stability following its merger.

The bank has since appointed external lawyers to review the issues flagged in Chakraborty's resignation letter.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)