No room for insinuations, says Sebi chief after HDFC Bank chairman's exit

If there are concerns, they must be explicitly disclosed and substantiated rather than left to insinuations, Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said on Monday, about the high-profile exit at HDFC Bank.

Pandey’s comments come after the resignation of HDFC Bank’s non-executive chairman and independent director Atanu Chakraborty, who stepped down with immediate effect, citing ‘certain happenings and practices’ that were not aligned with his personal values and ethics.

“When they say such a thing, it is important to give a reason. Nobody is expected to make any insinuations without proper evidence and recording…as it has an impact,” Pandey said at a press conference.

He added that independent directors are bound by a governance framework that requires concerns to be formally escalated within the board. Where independent directors have reservations about the company's functioning or proposed actions, they must ensure these are examined by the board and, if unresolved, recorded in the board's minutes.

“There is a process which is there, and obviously, if there is any concern, then it has to be there in the board meetings and board governance framework. So it can't be just a general thing,” said the Sebi chief.

“They are also required to be protective of the interests of the minority shareholders and act responsibly,” he added.

India’s largest private sector lender said the Reserve Bank of India (RBI) last week approved the appointment of board member and HDFC group veteran Keki Mistry as interim part-time chairman for three months from 19 March.

Chakraborty, who joined the HDFC Bank board in May 2021, said his tenure was marked by ‘momentous events’, including the merger with HDFC Ltd that created a financial conglomerate under the bank.

“This strategic initiative made HDFC Bank the second-largest bank in the country, though the benefits of the merger are yet to fully fructify,” he said.

A day after Chakraborty’s resignation, RBI said it had no concerns regarding the ‘conduct or governance’ of the bank. In a statement, the central bank said it had taken note of the recent developments and approved the transition arrangement for the part-time chairman position, as proposed by the lender.