Chakraborty was Asked to Reconsider Resignation, Elaborate on Concerns, Change Language in Letter: HDFC Bank CEO

HDFC Bank's chief executive and managing director Sashidhar Jagdishan on Thursday said its former chairman Atanu Chakraborty was asked to reconsider his decision to quit, elaborate on concerns involving ethics, and also "take back some of the language" in the resignation letter.

Addressing reporters after the surprise move, a majority of the board members of the largest private sector lender said they are "baffled" by Chakraborty's move because he did not offer any specific concerns that he is alluding to in the resignation letter.

Stressing that there are no issues at the bank, its management exuded confidence that it will be able to recoup the hit to its reputation in due course.

In a surprise move, Chakraborty, a retired bureaucrat who had been on the board of the bank for five years, quit the bank on Wednesday citing concerns on ethics. "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," he said in the resignation letter.

Jagdishan said, "Every board member" tried to persuade Chakraborty to take back his resignation or elaborate on the concerns so that the same can be readdressed but he did not relent.

The resignation dated March 17 (Tuesday) came up for discussion during a meeting of the nomination and remuneration committee of the board on Wednesday and at about 7 PM, four board members including two wholetime members and two independent members, initiated a dialogue with the RBI about the happenings, Jagdishan said.

There were also attempts to "take back some of the language" in the letter, Jagdishan said, suggesting that lack of success on it led to a briefing to the RBI and the regulator was kind in appointing Keki Mistry as the interim chairman for three months.

Amid widespread speculation on the differences between the management and Chakraborty, Mistry alluded to a "personal relationship issue" but asked reporters not to get into the same.

Speaking on the same call, independent director M D Ranganath said board members "repeatedly" asked Chakraborty to cite specific instances, but none were pointed out, while Renu Sud Karnad said the board was "baffled" because he was not forthcoming about any of the claims made in the resignation letter.

HDFC Bank's governance is top class, and the lender cherishes values of transparency, trust and integrity, the 71-year-old Mistry, who was the executive vice chairman of the bank's parent mortgage lender HDFC, said, adding that he would not have taken up the assignment if he had any doubt on the issues.

The Nomination and Remuneration Committee (NRC) will meet in a month to discuss Jagdishan's reappointment,“ his term is ending in another seven months,“ and also select a chairman, Mistry said.

In response to a question on whether an investigation into its Dubai operations, where it has been barred from onboarding any new clients from the IFSC centre branch, led to the resignation, Jagdishan said there are several such matters that occur, but asserted that it is not the reason.

Ranganath chipped-in to say that the investigation, accountability fixing and disciplinary actions in the Dubai matter is over, and the issue is now closed.

Small issues keep coming on a routine basis in an institution's journey but there is nothing substantive which would lead to a resignation, Mistry said, adding that there is nothing that the RBI has flagged for action to the lender.

To a query on concerns surrounding HDFC Bank's merger with parent HDFC, its deputy managing director Kaizad Bharucha said the merger has accrued benefits by way of increased saving account relationships of home loan borrowers, and added that the average balances in such accounts are 2.5 times of the bank average.

Harsh Kumar Bhanwala, who heads the NRC, clarified that although the letter is dated Tuesday, the board learned of the matter only on Wednesday during an NRC meeting.

Expecting no surprises in the future, given the rigour in execution and ethos of the lender, Mistry said his focus during the stint will be to stabilise things.

HDFC Bank shares closed 5.13 per cent down at Rs 799.70 apiece on the BSE, as against a 3.26 per cent correction on the benchmark.