After HDFC Chairman Quits, RBI Says "No Concerns Around Bank Functioning"

A day after HDFC Bank's part-time chairman Atanu Chakraborty tendered his resignation with immediate effect, The Reserve Bank of India (RBI) on Thursday said it sees no material concerns around the lender's functioning or governance.

In a brief statement, the central bank said: "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."

Reassuring stakeholders, the RBI underlined the bank's overall strength: "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."

It further said, "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."

The clarification comes after Chakraborty stepped down citing differences over "values and ethics" in his resignation letter. This unsettled investors and triggered a sharp sell-off in the bank's shares on Thursday. Its US-listed shares dropped about 7 per cent after news of the resignation broke, while the stock declined nearly 5 per cent in domestic trading on Thursday. At 11:20 am, shares were trading at Rs 801, down from the previous close of Rs 842.95. FOLLOW LIVE UPDATES

Earlier in the day, newly-appointed interim chairman Keki Mistry also dismissed speculation of any internal discord, according to a Reuters report. He said there is no power struggle within the bank and that the board remained focused on maintaining investor confidence.

What Did Chakraborty's Resignation Say?

In a letter to the Chairman of Governance, Nomination, Remuneration Committee of the bank, Chakraborty said, "Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal values and ethics. This is the basis of my aforementioned decision." The letter added, "I confirm that there are no other material reasons for my resignation other than those stated above."

Chakraborty, who joined the board of HDFC Bank in May 2021, further wrote, "My tenure on the board saw momentous events like the merger of the bank with HDFC Ltd that created a conglomerate under the Bank. This strategic initiative made HDFC Bank the second largest Bank in the country. Though, the benefits of merger are yet to fully fructify."