No power struggle or governance issue: HDFC Bank’s Mistry after Chairman quits

The bank’s shares fell 5.13% to Rs 799.70 on the BSE Thursday, helping drag down the benchmark Sensex by 3.3%.

Speaking to reporters in New Delhi, Financial Services Secretary M Nagaraju said HDFC Bank is a “strong institution with strong fundamentals” and that the Reserve Bank of India had already issued a statement on the developments.

In its statement, the RBI said the HDFC Bank has sound financials, a professionally-run board, a competent management team, and that the central bank’s regular assessment had not shown any “material concerns” regarding conduct or governance.

Mistry told analysts: “Differences on minor issues do come up from time to time but there was nothing material whatsoever. In no board meeting has there been any kind of complete differences of opinion or anything of that sort. And the board minutes will reflect that.”

“Relationships, I mean human beings are human beings. There will always be some relationship issue between individuals. Those kinds of things happen. There was no power struggle in the bank. The bank works, the entire bank, the management team in the bank works as a cohesive unit and, to my mind, will continue to work as a cohesive unit,” he said.

In his resignation letter, Chakraborty said “certain happenings and practices within the bank are not in congruence with my personal values and ethics”.

Mistry said, “None of us as board members are aware of what are the specific issues which Chakrabarty wrote in his letter. The board members asked him yesterday and he did not give any specific explanation.”

“There were no specific happenings and practices that were brought to our attention. There were no specific operational or other issues that have been highlighted. The board’s oversight mechanism remains fully operational and our collective commitment to protecting the interests of the institution, depositors, shareholders and all stakeholders is completely and totally unwavering,” he said.

He said Chakraborty’s resignation has nothing to do with the operational profitability of the bank. Mistry was appointed as interim part-time chairman for three months following Chakraborty’s resignation from the board Tuesday.

“The management team does and will continue to work in a cohesive manner,” Mistry said, adding that regulators RBI and SEBI were fully informed. “The RBI is fully in the loop and they are comfortable (with) what is going on in the bank,” he said.

“I would never remain on the board if there were any issues with governance,” he said. “The bank is very strong on ethics.”

Reassuring investors and stakeholders, he said there were “no material matters at this point of time” and that the board remained committed to “safeguarding investor confidence”.

Sashidhar Jagdishan, the bank’s Managing Director and Chief Executive Officer, said, “The board would re-examine the organisation structure as we move forward.”

Mistry said, “When this thing happened yesterday evening, the first thing the board members did – the people who were in Mumbai – (was that) they met the RBI. The RBI gave their approval for making me interim chairman for a period of three months to get (things) stabilised, and then that’s about it. And differences of opinion, differences of views may always be there between individuals but there was nothing. I received nothing substantive, nothing whatsoever.”

“And as far as our seeking some explanation from Chakraborty, the board will of course meet very, very soon and take a call on how to deal with the problem,” he said.

Meanwhile, sources said neither the RBI nor the bank initiated or directed Chakraborty’s exit, describing it instead as a personal decision. The underlying friction arose from Chakraborty’s style of functioning despite his non-executive role, with his exit ultimately tied to personal differences with the senior management.

Although tensions between Chakraborty and the board had been building over time, his resignation came as a surprise. A board meeting was convened at short notice, during which Mistry was asked to step in temporarily to ensure stability until a new chairman is appointed.

The board, Mistry said, will follow the due procedure to select the chairman.

Chakraborty did not provide specific reasons beyond those mentioned in his resignation letter. However, sources indicated he may have had concerns about the conduct of certain individuals, who are in the middle level, linked to past lapses at the bank. However, it remains unclear whether these concerns were formally raised or documented internally.