HDFC Bank is not mulling legal action against former part-time Chairman Atanu Chakraborty, who resigned from the company in an unprecedented move last month, citing ethics and values.
According to a report by ET Now citing people familiar with the knowledge of the discussions, HDFC Bank is unlikely to seek damages from Chakraborty despite an alleged impact on its reputation.
Livemint was not able to verify the authenticity of the report. This article will be updated if HDFC Bank releases an official statement.
The ET Now report further said that HDFC Bank will focus on an internal review rather than seeking a litigation.
While the chances to seek damages from Chakraborty is unlikely at the moment as per the report, HDFC Bank’s Board of Directors has mandated external law firms to independently examine governance processes, accountability and internal controls. This decision comes amid the lender’s push to strengthen its governance mechanism and oversight framework.
HDFC Bank appoints external law firms
Days after Atanu Chakraborty’s resignation on 18 March, HDFC Bank appointed two domestic and one international law firm to conduct an investigation and review the ex-chairman’s letter.
Wadia Ghandy & Co, and Trilegal were the two domestic firms that had been appointed.
The domestic firms Trilegal and Wadia Ghandy & Co have been asked to report on the governance standards followed at the bank, according to sources cited by Reuters.
The firms will study minutes of past board meetings to see if there is any truth in the differences over “values and ethics” cited in the letter from Chakraborty, who stepped down last week, one person told Reuters.
Why did Atanu Chakraborty resign?
In an interview with CNBC TV18, Atanu Chakraborty revealed that the misselling of the AT-1 bonds, which led to a rap from the regulators, and under-performance of HDFC Bank were the primary reasons behind his shock resignation.
Personal differences with the management are “overblown” and it was not the issue “by a long distance”, Chakraborty mentioned, adding that “incongruence” on values and ethics led him to step down.
He revealed that the misselling of the AT-1 bonds were viewed as a “technical issue” by the management, and action came after eight years of Indian and Dubai regulators raising the issue.
“I feel that these conduct issues (arising out of the misselling) should not arise… tight supervision should ensure that even if they arise, they’re nipped in the bud. However, if they are termed as technical, it leaves a little bit of a leeway,” he said.
He also rued that “underperformance” of HDFC Bank was another reason behind his resignation. He cited the share prices staying low, lower share of the cheaper current and saving account deposits and high cost to income ratio as the reasons.
He also said it is the duty of independent directors like himself to ensure better performance for the bank.
Appointed part-time chairman in April 2021 and reappointed in May 2024 through May 4, 2027, Chakraborty oversaw HDFC Bank’s $40-billion merger with mortgage lender HDFC Ltd, creating a financial services behemoth.
- HDFC Bank prioritizes internal governance review over legal recourse.
- Chakraborty’s resignation highlights significant concerns about ethics and values within the bank.
- The appointed law firms will investigate past governance standards and decision-making processes.
