Atanu Chakraborty, former part-time chairman of HDFC Bank, who stepped down abruptly on March 18, said on Monday that his resignation was not triggered by any single issue. Instead, he said, it stemmed from a growing “incongruence” between the bank’s practices and his own values and ethics over the past two years.
Chakraborty, a former Indian Administrative Service officer, said a range of concerns had contributed to his decision. These included the misselling of Additional Tier-I (AT1) bonds in Dubai, the underperformance of the bank’s share price, subdued credit growth, low current and savings account deposits, and a high cost-to-income ratio.
“My only point was that it was not congruent with my own sense,” he said in an interview with CNBC TV18. “It is material, but the materiality of it could vary, as I think my standards were different from the prevailing standards. In that case, it is better to move away without placing blame, while leaving the door open for introspection for the board. If the board introspects and feels all is well, I am a happy person.”
Two days after his resignation, the bank asked three executives to leave amid misselling concerns. According to the bank, it had identified certain gaps in client onboarding requirements at its Dubai International Financial Centre branch in the United Arab Emirates (UAE). Following a review, it took remedial measures in line with internal policies, including personnel changes.
The decision to ask the executives to leave was reportedly linked to the misselling of Credit Suisse AT1 bonds to retail customers at the Dubai branch, where they were marketed to non-resident Indians as fixed-maturity bonds. These bonds were written off after Credit Suisse collapsed and was taken over by UBS.
Chakraborty said HDFC Bank’s chief executive had described the matter as a “technical lapse” involving documentation and regulatory interpretation.
“I feel that if a large number of customers are hurt, a significant amount of regulatory focus comes on the bank. It also brings reputational risk to the bank. Therefore, while the issues have been addressed — there has been involuntary separation of three senior managers, as well as 12 others being punished, with penalties ranging from major to minor; they are all at very senior levels — these are posteriori reactions,” he said.
“I feel that these conduct issues should not arise in the first place, or tight supervision should ensure that even if they do arise, they are nipped in the bud,” he added, saying this was where the incongruence lay.
The Reserve Bank of India (RBI) had, however, said in a statement after Chakraborty’s exit that there was no material concern regarding the bank’s conduct or governance. It had also said the bank remained well-capitalised and its financial position was satisfactory, with sufficient liquidity. Following Chakraborty’s resignation, the RBI approved Keki Mistry as HDFC Bank’s interim part-time chairman for three months.
Chakraborty also pointed to other issues. “There are many other matters… There was underperformance with respect to the share value — not performing up to the mark — which meant that shareholders’ wealth was not being maximised. Also, Casa (current account to savings account ratio) was low and the cost-to-income ratio was high. A lot of people say — and I heard that chatter within the bank as well — that it was because of the merger. No, the merger, if anything, was the best thing that happened. It really did not distort the balance sheet, and if at all there was some distortion, it should have been corrected,” he said.
HDFC Bank’s share price has fallen more than 13 per cent since Chakraborty’s exit, eroding around ₹1.7 trillion in market capitalisation.
He said the argument that the erosion in market value was caused by his resignation was misplaced, and he completely rejected it. He also dismissed suggestions that he had quit because of disagreement over the managing director and chief executive officer’s reappointment for another three years. He said the matter was not taken up for discussion.
Chakraborty reiterated that he had not said anyone was right or wrong. “What I mentioned was internal to me… it caused a dilemma. Whether it causes a dilemma for the bank is for its board to address. If it causes a dilemma for me and I find it difficult to live with, I should move on.”
HDFC Bank’s board has appointed external law firms to review Chakraborty’s resignation letter, in which he alleged that certain “happenings and practices” at the bank were not in congruence with his values and ethics.
“My resignation is a larger governance and governance-plus kind of an issue, which the board of directors of the bank should be introspecting. No external lawyers would do that for them,” he said.
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