An independent legal review commissioned by HDFC Bank following the abrupt resignation of former Chairman Atanu Chakraborty is expected to be submitted in a week, according to sources familiar with the matter. The report could remove a key uncertainty surrounding the reappointment of Managing Director and Chief Executive Officer Sashidhar Jagdishan whose second tenure ends in October.
The findings, prepared by law firms Trilegal and Wadia Ghandy & Co, along with an international law firm, are expected to be submitted to the board after nearly three months of review into concerns flagged by Chakraborty in his resignation letter. The report has been delayed beyond the bank’s internal expectations, the sources said.
An immediate release of the report, which would be made public, is critical as the HDFC Bank board appears to be racing against time to get regulatory approval for Jagdishan’s reappointment. The usual norm is to apply six months before the incumbent’s term expires, though sources said there is no rule to this effect.
The formal process of proposing Jagdishan’s name will still take time even after the review committee’s report. The board’s three-member nomination and remuneration committee, headed by Harsh Kumar Bhanwala, the former chairman of the National Bank for Agriculture and Rural Development (Nabard), will meet only after the report is submitted.
Few expect the legal review report to contain anything significantly adverse against the bank, as Chakraborty did not go beyond referring to certain happenings and practices in his resignation letter that were not in congruence with his personal values and ethics.
In yet another development, the HDFC Bank board has reportedly requested the regulator for another three-month extension for Keki Mistry whose current term expires on June 18. The bank requested this extension to ensure continuity while it evaluates legal reports and finalises a permanent chairman. Mistry has previously indicated a reluctance to take on the permanent role due to his long-standing prior commitments to the bank and potential conflict-of-interest concerns.
Sources said the board is close to finalising a name for the next non-executive chairman but as the process may take time, Mistry is expected to continue till September-October this year.
The next chairman is widely expected to be a retired regulator or an eminent banker who knows the nuances of banking and can guide the board effectively.
Meanwhile, the report of the governance review committee is going to be closely watched issue since Chakraborty’s departure raised questions about internal practices at India’s largest private-sector lender.
Chakraborty stepped down before completing his term, stating that “certain happenings and practices within the bank, that I have observed over last two years, are not in congruence with my personal values and ethics.”
While neither the former chairman nor the bank publicly elaborated on the issues he referred to, the board subsequently appointed external law firms to independently investigate the matter and submit their findings. Sources said the reports will provide the board with an assessment of the concerns raised by Chakraborty and recommend whether any further action is warranted.
When contacted, Trilegal declined to comment on the status of the review. HDFC Bank did not respond to queries sent by Financial Express until the time of publication.
The bank has also faced increased scrutiny over governance-related issues in recent weeks. On May 27, The Indian Express reported that the bank had internally examined payments worth ₹45 crore made to Maharashtra State Road Development Corporation that were allegedly routed as marketing expenses to effectively offer higher returns on deposits. HDFC Bank denied the allegations, saying it has robust internal oversight, audit and control processes in place. Sources, however, said it’s a case of “much ado about nothing”.
Responding to questions on differential interest rates offered to certain clients, RBI Governor Sanjay Malhotra said during the post-policy press conference that there is a clear and consistent policy governing deposit rates. Banks may offer differential rates to specific categories, such as senior citizens, depending on the tenor of deposits.
He added that banks must remain transparent. “You have to display them to everyone clearly and any differential rate beyond that, if someone is giving, is certainly not acceptable,” he said.”
Earlier, the central bank stood firmly behind HDFC Bank. In a statement after Chakraborty’s resignation, RBI had said, “There are no material concerns on record as regards its conduct or governance.”