HDFC Bank Ex-Chairman's Ethics Concerns Found Unsubstantiated by Law Firms

MUMBAI: The law firms appointed by HDFC Bank to examine concerns raised by its former Chairman Atanu Chakraborty in his resignation letter have found 'no merit' in the issues flagged, sources aware of the development told ET.

"Based on the review conducted so far, the law firms have not identified any evidence to substantiate the concerns referenced in the former chairman's resignation letter. Their findings have been communicated to the bank's legal team informally and are expected to be placed before the Audit Committee shortly," said a person familiar with the matter.

HDFC Bank did not respond to a request for comment.

The findings are expected to be submitted to the audit committee of the bank's board as early as this week, following which the full board will meet to deliberate on the report, said the sources cited above.

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The reviews were prompted by Chakraborty's dramatic March 18 resignation, a decision he had said in a letter to the exchanges was prompted by alleged deviations 'incongruent' with his ethics and value systems. The reference to possible ethical transgressions at the country's most-valued lender by Chakraborty, a former Secretary at the Department of Economic Affairs and a retired IAS officer, sent shockwaves through India's banking establishment and caused an immediate slide in the stock.

HDFC Bank had engaged domestic law firms Wadia Ghandy and Trilegal, along with US-based law firm Wilson Sonsini, to examine the circumstances surrounding his departure.

The scope of the review included a detailed examination of board meeting recordings, minutes and agendas from the past two years to determine whether Chakraborty had raised concerns about unethical practices or corporate governance issues during his tenure. It also covered all whistleblower letters received and escalated to the board during this period, to assess whether they raised substantive concerns and whether adequate action was taken in response, the people said.

The Audit Committee of the Board, which will receive the findings, comprises M D Ranganath as Chairperson, along with members Lily Vadera and Dr Harsh Kumar Bhanwala.

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"The preliminary findings of the review do not indicate any governance irregularities or ethical breaches of the nature implied in the resignation letter," said another person familiar with the matter. "The firms have not come across any material that suggests the former chairman had formally raised concerns relating to unethical conduct or governance lapses during board proceedings."

In an interview with ET published on March 23, HDFC Bank Managing Director and CEO Sashidhar Jagdishan had said the bank would hold multiple board meetings over the coming months to review decisions made in recent years. "We are not infallible. If there are areas where we need to improve, we will improve. We will address all issues," he had said.

Jagdishan had acknowledged that the bank had yet to fully understand what prompted the exit after Chakraborty's five-and-a-half years on the board.

"This is like fighting a ghost. We had never anticipated this," he had said.