HDFC Bank chairman says no systemic governance concerns, promises strict action against unethical practices

There are “no governance-related concerns at the systemic level” at HDFC Bank, newly appointed part-time chairman Rajiv Kumar said on Wednesday, months after a controversy over the exit of former chairman Atanu Chakraborty.

“Large institutions like HDFC Bank may encounter some issues from time to time. It is important that these issues are addressed in a timely and transparent manner,” Kumar told shareholders at the bank’s 32nd annual general meeting on Wednesday.

He assured shareholders the board would continue to take a tough stand against any wrongdoing.

“The bank has demonstrated that it has control systems/guard rails in place to identify deviations, if any, and the oversight at committee levels is strong,” he added.

The Reserve Bank of India approved Kumar’s appointment as part-time chairman of HDFC Bank for a three-year term on 15 July, shortly after an external legal review cleared the bank in the controversy surrounding Chakraborty's resignation.

Chakraborty stepped down as chairman of India's largest private sector lender on 17 March, citing “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics. He did not explain more at the time but said in a television interview later that the alleged misselling of Credit Suisse's perpetual bonds had become a point of disagreement with the bank's management.

Chakraborty told CNBC TV18 in an interview on 30 March that while he typically avoids sharing any boardroom discussions, in this case, the issue had been discussed in public by chief executive officer Sashidhar Jagdishan.

Legal review

Following his exit, HDFC Bank appointed law firms Wilson Sonsini Goodrich & Rosati and Wadia Ghandy & Co to conduct an independent legal review. The bank said the review covered the two years preceding Chakraborty's resignation and included an examination of board and committee meeting minutes, agenda papers, interviews with independent directors and senior executives, and a review of thousands of documents.

In June, HDFC Bank said the three-month review had examined Chakraborty's allegations and found no evidence warranting concerns over the bank's governance practices.

The review found no contemporaneous support for Chakraborty’s statement in the board or board committee minutes or materials reviewed, or in contemporaneous communications about the review and approval of the minutes of meetings he attended, the bank said in a statement.

Following Chakraborty's exit, HDFC Bank appointed Keki Mistry as interim chairman with the RBI's clearance. Jagdishan noted that the day after the resignation, board members briefed analysts and the media, clarifying that Chakraborty had never raised any issues regarding practices that conflicted with his personal values or ethics during their discussions.