India's largest private sector lender, HDFC Bank, has hired several law firms to review the circumstances surrounding the resignation of its previous part-time chairman, Atanu Chakraborty. This comes at a time when the bank is seeking to address concerns over governance following his sudden resignation last week.
The bank's shares have appreciated by 1.3% following this announcement, thus ending a three-day losing streak in which its market capitalisation lost almost $16.27 billion.
Multiple firms roped in for review
According to sources with direct knowledge of the matter, HDFC Bank has hired two domestic law firms, Trilegal and Wadia Ghandy & Co, and a law firm based in the US to review Chakraborty's resignation letter and ascertain whether governance standards have been followed in this case.
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The firms are expected to review meeting minutes to confirm claims of differences over "values and ethics" raised in Chakraborty's resignation letter. A source noted that HDFC Bank is unlikely to sue Chakraborty for damages, notwithstanding his resignation's impact on its reputation.
The bank, Trilegal and Wadia Ghandy did not immediately respond to Reuters’ requests for comment. The identity of the US-based firm could not be confirmed.
Bank stresses governance framework
In a statement to stock exchanges, HDFC Bank said the review aims “to reinforce the robust governance standards of the bank,” without naming the firms involved.
Earlier, the bank had stated that the exit might be due to differences between Chakraborty and the management, but assured that there are no major issues.
Chakraborty did not comment further on his resignation. “Kindly read my letter. It makes no claims or insinuations,” he said, and did not comment further on the organisation’s actions.
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The Reserve Bank of India has stated that HDFC Bank is financially sound and professionally managed, and there are “no material concerns on record.” They have approved Keki Mistry as the interim non-executive chairman for three months.
SEBI Chairman Tuhin Kanta Pandey stated that independent directors need to follow regulatory codes. “No one can make insinuations without proper evidence being recorded,” he said, and added that such statements might affect the interests of minority shareholders.
Chakraborty, as independent director and non-executive chairman, had managed the $40 billion merger between HDFC Bank and HDFC Ltd. The shares had fallen by almost 12% after his resignation.
