Bedlam created by resignation of HDFC bank Chairman

Mr. Atanu Chakraborty, the Part-time Chairman and Independent Director of HDFC Bank, has tendered his resignation abruptly, citing concerns over operational practices that he deemed inconsistent with his personal values ​​and ethical principles. He has not elaborated. This has sent shockwaves through the banking and financial sector resulting in huge loss to shareholders arising out of plummeting price of the bank stock. It was incumbent upon him, at the very least, to clearly articulate the reasons for his departure to the Board of Directors of the bank. By failing to do so, he has created a miasma of suspicion.

Brand HDFC

RBI has classified the Bank as a ‘Domestic Systemically Important Bank’. Consequently it is a bank “Too Big to Fail.” There is a prevailing public perception that the bank possesses a robust financial position and has highly competent executive management and the board.  The management, too, has affirmed this stance and has been trying to salvage the situation. 

Another crucial point is that the brand HDFC has evolved from a value system cultivated over many years by the likes of late Mr. H. T. Parekh, the pioneer of the country’s commercial home loan business and the renowned banker, Mr. Deepak Parekh.

Statutory responsibility

Mr. Chakraborty’s resignation threatens to undermine this perception and crates an atmosphere of suspicion. Every director of a company, including independent director, has a statutory duty as per section 166(2) and (3) of the Companies Act, 2013 to act in good faith to achieve the objectives of the company and to further the interests of its members and other stakeholders. This responsibility is fiduciary. It was therefore his duty to apprise the board or the regulator (RBI) of his concerns. It is only then that they could have taken appropriate remedial measures. Moreover, the board could then determine whether it is necessary to make any disclosures to stock exchanges in terms of listing agreement and to shareholders. It is precisely for this reason that Mr. Chakraborty must break his silence and vocalize. 

Misdemeanour

Reports in the media indicate that over the past five-six years, RBI and SEBI have taken action against the bank on four or five occasions. In 2020–21, restrictions were placed on the bank for issuance of new credit cards due to a weak IT security system. In July 2025, the bank was fined for violating foreign investment regulations. A punitive action was taken against the bank for employing multiple criteria for a single type of loan, outsourcing KYC compliance activities to external agents, and for conducting through it’s wholly owned subsidiary a business which the bank itself was not authorized to undertake. A controversy also arose concerning the relationship between the bank’s Managing Director and some trustees of Lilavati Hospital Trust of Mumbai. In September 2025, the Dubai Financial Services Authority had barred the bank’s Dubai branch from onboarding new customers, on concerns over financial services being offered to clients not onboarded by the branch and issues with onboarding practices. 

All these lead to an inference that the bank does not seem to be serious about regulatory compliances and its sole objective appears to be generating profit by any means. The bank has attempted to downplay these episodes by portraying them as issues related merely to compliance and not about the quality and legitimacy of its transactions. In case that indeed is the case, then why has it dismissed three of its officers who were allegedly involved in the misselling of the AT1 bonds Credit Suisse?

Therefore, it would be naive to assume that these considerations did not weigh on Mr. Atanu Chakraborty’s mind. Given his stature as the former Secretary of the Department of Economic Affairs in the Union Ministry of Finance, his decision to resign without explicitly stating the reasons for the same is all the more serious and inappropriate. Such conduct does not befit a high-ranking professional of his standing. It must be noted with regret that he appears to have abdicated his statutory responsibilities. There is a lot to be desired in his conduct on the touchstone of these benchmarks. 

Other directors

At the same time, it is also true that other Directors cannot plead ignorance about the flaws and errors in the functioning of the bank. Did they discharge their responsibilities by voicing their concerns during the Board meetings? It is necessary decipher the minutes of the Board meetings to understand this. 

External counsels 

The Bank has now appointed external legal counsels. It has however not explicitly stated the reasons for the same and has been as opaque as the Chairman. It would be far more appropriate to communicate these reasons to the shareholders. A lack of transparency has created, the perception that there is much more than that meets the eye. The need of the hour is to implement transparent corrective measures. The Board ought to convene a Special General Meeting to apprise the shareholders of the developments within the Bank. 

The episode highlights an urgent need to formulate regulations mandating the board members and Key Managerial Personnel of listed companies to explicitly state the reasons for their departure. The government like it did in Tata trusts and Tata Sons feud, need to step in to prevent the situation from spiralling out of control. 

MD’s interview

In an interview given to an English financial daily after the resignation Managing Director, Sashidhar Jagdishan, has stated that the bank would hold several meetings of the board in the coming months to review decisions taken in recent years. Is that the tacit acceptance that there have indeed been lapses?  He has further stated that if there are areas requiring improvement, we will make those improvements. He acknowledged that the bank has not yet fully understood the exact reasons behind Mr. Chakraborty’s departure. The bank had urged Mr. Chakraborty to articulate his concerns through established internal channels. When asked whether the bank would pursue legal remedies for the damage caused to its reputation, he replied, “We are seeking legal counsel to explore all possibilities.”

In the light of what has happened, one earnestly feel that the management and board should do everything within their means, and do it with a sense of urgency to stop further damage to  brand HDFC which is on a slide.

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