Allegations must not be vague, must be substantiated: SEBI Chairman on HDFC Bank chairman exit

SEBI Chairman Tuhin Kanta Pandey said on Monday that merely flagging ethics or governance concerns in a resignation letter does not constitute sufficient grounds for regulatory action. He was referring to the recent management shift at HDFC Bank, where its chairman stepped down last week citing ethical concerns without elaborating. Asked why SEBI has not initiated a probe despite the mention of governance issues, Pandey said vague statements cannot be acted upon.

He added that unless concerns are clearly specified, accepted by the board, and recorded in board minutes, they cannot be considered by the regulator.

'SEBI not to initiate probe in absence of clear details and formal records'

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The SEBI chief emphasised that any such allegations must be specific and clearly articulated, rather than vague or general in nature, underlining that concerns should be formally presented before the company’s board.

As per SEBI’s disclosure norms, listed companies are required to duly record such issues in board meeting minutes. This documentation serves as a critical basis for any further examination.

Keki Mistry takes interim charge after chairman exit at HDFC Bank

Last week, HDFC Bank named eminent banker and group veteran Keki Mistry as interim non-executive chairman for three months after Atanu Chakraborty’s abrupt resignation.

Mistry said on a call with investors that there had been no discussion regarding governance within the bank’s board and that he was not aware of the issues raised by Chakraborty in his resignation letter.

The sudden exit of Chakraborty, whose term was originally scheduled to end in May 2027, triggered turmoil on Dalal Street. The index heavyweight stock fell as much as 8.7 per cent in intraday trade on March 19 before settling 5.3 per cent lower for the day. The selling pressure came even as the country’s largest private bank said no material issue was involved.

The RBI said HDFC Bank remains a domestic systemically important bank with sound financials, a professionally run board, and a competent management team. The central bank added that, based on its periodic assessments, it found “no material concerns” regarding the bank’s conduct or governance, and that it remains well capitalised with a satisfactory financial position.

Branch banking chief, two others removed

HDFC Bank has removed its branch banking head Sampath Kumar, along with EVP Harsh Gupta and SVP Payal Mandhyan, allegedly in connection with the Credit Suisse AT-1 bond mis-selling case, according to sources.

The action followed complaints from some investors who alleged they were sold AT-1 bonds as fixed maturity and assured return products.

What did Atanu Chakraborty's resignation letter say?

The letter referred to “certain happenings and practices within the bank” over the past two years that were “not in congruence” with his “personal values and ethics”.

“This is the basis of my aforementioned decision,” he wrote.

HDFC Bank had appointed Chakraborty as chairman in April 2021 for a three-year term, and later reappointed him for another three years.