HDFC Bank’s review finds no major governance concerns after chairman Atuna Chakraborty’s exit, sources say

MUMBAI: Law firms reviewing governance at are set to report this month that they have not found any major lapses, two people with direct knowledge of the findings said, clearing the way for the reappointment of its CEO.

India’s largest private lender by assets called in Mumbai-based Trilegal and Wadia Ghandy & Co after ‌resigned as chairman in ⁠March ⁠citing “incongruence” between his personal values and bank practices. He did not elaborate.

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HDFC Bank shares extended gains on the day to as much as 3.1% at 796.95 rupees after the Reuters ​report, before easing a little to trade 2.9% higher at 0930 GMT. Shares were trading about 1.8% higher ahead of the Reuters report.

The resignation was followed by a 13.81% drop in the bank’s share price, or $16 billion in the stock’s value, and prompted a rare statement from the seeking to allay investor and depositor concern about a lender deemed too big to fail.

It also threw into doubt the lender’s application at the central bank due May-end to reappoint CEO .

The affair exposed leadership strain ⁠at HDFC, ‌a bank majority-owned by foreign institutional investors and which has faced ire over stock that is down 5% since a $40 billion merger with parent HDFC Ltd in 2023. Closest rival has risen 33% in that time and the ⁠benchmark Nifty 50 is up 24%.

With 120 million customers and just over a tenth ​of banking deposits, a clean bill of health from the law firms would bring certainty to ​a bank whose stability is critical to the economy.

The law firms examined minutes and video recordings of board and extraordinary general meetings over the last three years to ascertain whether Chakraborty had raised governance issues and, if so, how those issues were addressed, the people said, declining to be identified as the findings are not public.

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All issues raised at board level were handled as per prescribed processes, one of the people said, without elaborating on those issues.

The law firms are likely to hand their report this month to the board, which will then ‌submit it to the central bank, the person said.

The review findings have not been previously reported.

Chakraborty declined to comment on Reuters’ texted queries. HDFC Bank, the Reserve Bank of India, Trilegal and Wadia Ghandy & Co did not ​respond to emailed ​requests for comment.

BANK SET TO PROPOSE CEO ⁠REAPPOINTMENT

The resignation and review had delayed a board decision on whether to recommend Jagdishan for reappointment as CEO after his three-year term ends in October. The central bank approves lenders’ CEO appointments.

HDFC Bank will propose Jagdishan for reappointment after the law firms submit their report, the ​second person said.

The central bank is of the view that there are no issues that could preclude reappointment, said a third person, who is familiar with RBI thinking. If the review tallies, the RBI would have no problem supporting reappointment, the person said.

After Chakraborty resigned, the central bank said that, on the basis of its periodical assessment, “there are no material concerns on record as regards its conduct or governance”.

Proxy advisor last month said the resignation was likely driven by individual personality rather than any threat to shareholder value.