The Reserve Bank of India (RBI) was quick to clarify that there were no material concerns regarding HDFC Bank’s conduct or governance, hours after the abrupt resignation of part-time chairman Atanu Chakraborty citing ethical issues.

Taking note of the recent developments at the country’s largest lender, the RBI approved, as requested by the bank, a transition arrangement of Keki Mistry as interim part-time chairman of the bank with effect from 19 March, for a period of three months.

"HDFC Bank is a domestic systemically important bank (D-SIB) with sound financials, professionally run board and competent management team. Basis our periodical assessment, there are no material concerns on record as regards its conduct or governance," the RBI said in a statement.  

The bank remains well-capitalised and its financial position remains satisfactory with adequate liquidity, the regulator said as it sought to reassure customers, investors and stakeholders.

This is the first time that a part-time chairman of HDFC Bank has left mid-way, raising concerns over its functioning.

The RBI said it will continue to engage with the bank’s board and management on the way forward.

Earlier, Chakraborty resigned as part-time chairman and independent director of the bank, citing concerns over “certain happenings and practices” that were not aligned with his personal values and 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. This is the basis of my aforementioned decision," Chakraborty said in his resignation letter dated 17 March.

In a bid to prevent adverse speculations spreading on governance issues, HDFC Bank said in a regulatory filing that there were no reasons behind Chakraborty’s exit other than those stated in his resignation letter.

Chakraborty was appointed part-time chairman effective 5 May 2021, almost a year after retirement as Economic Affairs Secretary. During his term, the reverse merger process of the bank with the parent entity HDFC Ltd, a leading mortgage firm, took place. 

The merger of HDFC Ltd with HDFC Bank became effective on 1 July 2023, creating a financial behemoth with a combined balance sheet of over Rs 18 lakh crore.

Chakraborty’s tenure was extended for another three years in 2024 till 4 May 2027.

The RBI has felt the need to promptly provide reassurance on the bank’s overall stability and oversight.