It Was Not Only Ethics! Why HDFC Bank Chairman Atanu Chakraborty Really Quit

Five days after HDFC Bank's part-time Chairman Atanu Chakraborty stunned investors with a blunt resignation letter citing ethical differences, a clearer picture is beginning to emerge.

According to a Bloomberg report, the real reason wasn't just a vague values mismatch, it was a full-blown boardroom battle.

So What Actually Happened?

Chakraborty, 65, a retired 1985 batch IAS officer of the Gujarat cadre and former Economic Affairs Secretary of India, called a board meeting on short notice on March 18 at the bank's corporate offices Mumbai. Directors were given little information about the agenda ahead of time.

When they assembled, the nomination and remuneration committee met first, and that's where Chakraborty reportedly dropped the bombshell. He submitted his resignation as part-time chairman before even informing the full board.

What followed was a tense environment. Directors reportedly tried to convince him to stay. When that didn't work, they urged him to soften the language in his resignation letter. He refused on both counts, and wouldn't elaborate on what he meant by "ethical differences."

Chakraborty's resignation letter read "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. I confirm that there are no other material reasons for my resignation other than those stated above."

What Was The Actual Fight About?

At the core of the dispute were two specific incidents and a broader frustration.

The first was the Credit Suisse bond fallout. When Switzerland's regulator wrote down roughly $17 billion of Credit Suisse's Additional Tier 1 (AT1) bonds during the bank's rescue by UBS in March 2023, global bondholders were wiped out. HDFC Bank was among several firms caught in the fallout, facing allegations of misselling, some customers claimed they weren't adequately warned about the high-risk nature of these bonds.

Point to note: AT1 bonds were created after the 2008 financial crisis to make bondholders, not taxpayers, absorb losses if a bank fails. They offer high returns in good times but carry serious risk. In India, banks can't sell these to ordinary retail investors, but can sell them to "professional investors", those with over $1 million to invest and sufficient financial know-how. HDFC Bank sold Credit Suisse's AT1 bonds to eligible overseas customers, which was legally permissible.

While some executives were sanctioned over the matter, Chakraborty felt the accountability didn't go far enough. He wanted more senior officials to be held responsible. Senior management disagreed, and that created a deadlock.

The second reason for the dispute was that of the Dubai branch ban. HDFC Bank was also barred from onboarding new customers at its Dubai branch after the Dubai International Financial Centre identified lapses in its processes. The bank has since said it completed a review, taken remedial action, and made personnel changes. But Chakraborty's frustration over the episode added to the growing rift, according to the Bloomberg report.

And thirdly, beyond specific incidents, Chakraborty was reportedly dismayed by the bank's overall performance, its profitability, customer service, and technology systems. While rivals like SBI and ICICI Bank have seen their shares soar over the past three years, HDFC Bank's stock has barely moved.

However, the next day, Chakraborty attempted to soften his stance. Speaking to NDTV Profit, he said he was not pointing out any wrongdoing at the bank. "My ideologies did not match with the organisation, and hence it was time to part ways," he said.

Was This A Personality Clash Too?

In a part, yes. Chakraborty had built a reputation for wanting closer oversight of the bank, something some executives quietly viewed as overreach, the report said.

Under long-time former CEO Aditya Puri, operational autonomy for management was a defining feature of HDFC Bank's culture. Current CEO Sashidhar Jagdishan largely continued that approach.

The result was a deepening trust deficit. At some point, the relationship between Chakraborty and the management simply broke down.

What Happened after He Quit?

The bank moved quickly to manage the fallout. It rushed disclosures, called an early analyst meeting, and CEO Jagdishan along with other board members met with the Reserve Bank of India to inform them of the resignation. Within hours, the RBI approved veteran HDFC Limited member Keki Mistry as interim chairman.

But damage control could only do so much. When markets opened the next morning, HDFC Bank shares nosedived nearly 9% in early trade, even with Mistry's appointment as reassurance. The stock recovered somewhat through the day, but still closed around 5% lower than its previous closing price of ₹843, wiping out roughly ₹1 lakh crore in market value. At its worst, the bank's market cap dropped to just over ₹11.85 lakh crore.

We had earlier reported on how the RBI responded to the resignation and whether Keki Mistry's appointment will be enough to reassure investors.

What Happens Next?

The timing is particularly awkward for HDFC Bank, which is still navigating balance sheet pressures following its 2023 merger with HDFC Limited. There are discussions, still ongoing, about whether to commission an independent review into the issues Chakraborty raised.

However, his deliberately vague resignation letter makes that complicated and regulators, too, are expected to keep a close watch.

On what the bank should do next, Founder and MD of proxy advisory firm InGovern Research Services, Shriram Subramanian was firm. "The conference call will not suffice. The board should constitute a committee of independent directors to look into the matter and put out a detailed statement to assuage investor concerns," he said.

SPRV Consultants founding partner, Ravi Varanasi, in a LinkedIn post said that the "absence of detail keeps the resignation in the realm of speculation." "But the language used suggests this is not a routine exit, and markets will be watching closely for what surfaces next," he added.

For now, the bank's near-term task would be to find Chakraborty's successor within the 90 days given for interim part-time chairman Mistry.