Shares of HDFC Bank, India's largest private sector lender, fell 5% on Thursday following the resignation of its part-time chairman and independent director, Atanu Chakraborty, who cited governance and ethical concerns within the institution [1]. In his resignation letter dated March 17, Chakraborty stated, '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' [1]. The letter was submitted to HDFC Bank during late market hours Wednesday [1].
During an investor call, interim part-time chairman Keki Mistry clarified that Chakraborty had not provided the board with any evidence or details regarding the alleged unethical practices [1]. The bank's board and India's banking regulator, Reserve Bank of India, did not immediately respond to requests for comment [1].
Foreign institutional investors hold over 47% stake in HDFC Bank, with the Government of Singapore and Norway's Government Pension Fund Global owning nearly 2.3% and over 1.2% stake, respectively [1]. Following the merger between HDFC Bank and HDFC, the entity is now the world's fourth largest bank, with a market capitalization of 13.08 trillion rupees ($140 billion) as of Wednesday, surpassing State Bank of India's 9.95 trillion-rupee valuation [1].
Deven Choksey, founder and managing director of DRChoksey FinServ, described Mistry's appointment as a 'strong firefighting move' but warned that HDFC shares may face 'significant selling pressure.' He advised investors to avoid 'bottom-fishing' until governance concerns are resolved [1].
CONCLUSION
HDFC Bank's share price dropped sharply after its chairman resigned citing ethical concerns, triggering significant investor anxiety. Analysts warn of continued selling pressure and recommend caution until governance issues are addressed. The event has had a high market impact, reflecting heightened scrutiny of the bank's leadership and practices.