HDFC Bank Governance Review Finds No Major Concerns After Chairman's Departure

HDFC Bank Set to Clear CEO for Reappointment After Governance Review

Mumbai-based law firms Trilegal and Wadia Ghandy & Co are expected to report this month that they have not found any major lapses in governance at HDFC Bank, clearing the way for the reappointment of its CEO. The review was initiated after Atanu Chakraborty resigned as chairman in March, citing "incongruence" between his personal values and bank practices.

The resignation was followed by a significant drop in the bank's share price, with a 13.81% decline, representing a loss of $16 billion in the stock's value. This prompted a rare statement from the Reserve Bank of India (RBI) seeking to allay investor and depositor concerns about a lender deemed too big to fail. The affair also threw into doubt the bank's application to reappoint CEO Sashidhar Jagdishan, which was due by the end of May.

The review exposed leadership strain at HDFC Bank, a bank majority-owned by foreign institutional investors. The bank has faced criticism over its stock performance, with a 5% decline since the $40 billion merger with parent HDFC Ltd in 2023. In contrast, its closest rival ICICI Bank has risen 33% in that time, while the benchmark Nifty 50 is up 24%.

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HDFC Bank has a significant customer base of 120 million and accounts for just over a tenth of banking deposits in the country. A clean bill of health from the law firms would bring certainty to a bank whose stability is critical to the economy.

The law firms examined minutes and video recordings of board and extraordinary general meetings over the last three years to determine whether Chakraborty had raised governance issues and how those issues were addressed. According to sources, all issues raised at board level were handled as per prescribed processes.

The review findings have not been previously reported. HDFC Bank, the RBI, Trilegal, and Wadia Ghandy & Co did not respond to requests for comment. Chakraborty declined to comment on Reuters' texted queries.

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The RBI is expected to support the reappointment of Jagdishan as CEO, given the review findings. HDFC Bank will propose Jagdishan for reappointment after the law firms submit their report, paving the way for a smooth transition.