HDFC Bank may not take legal action on Atanu Chakraborty, to focus on issues raised in resignation letter — Report

HDFC Bank is not considering taking legal action against former part-time Chairman Atanu Chakraborty, who resigned from the company last month in an unprecedented move citing ethics and values.

HDFC Bank is unlikely to seek compensation from Chakraborty despite the alleged impact on its reputation, according to a report by ET Now citing people with knowledge of the discussions.

Livemint was unable to verify the authenticity of the report. This article will be updated if HDFC Bank releases an official statement.

The ET Now report also stated that HDFC Bank will focus on internal investigation rather than filing a lawsuit.

While chances of seeking compensation from Chakraborty are unlikely at present, HDFC Bank’s Board of Directors has authorized external law firms to independently review governance processes, accountability and internal controls, according to the report. This decision comes amid efforts to strengthen the lender’s governance mechanism and oversight framework.

HDFC Bank appoints outside law firms

Days after Atanu Chakraborty’s resignation on March 18, HDFC Bank appointed two domestic and one international law firms to conduct investigation and examine the former chairman’s letter.

Wadia Ghandy & Co and Trilegal were the two local firms appointed.

According to sources quoted by Reuters, domestic firms Trilegal and Wadia Ghandy & Co were asked to report on the management standards followed at the bank.

The companies will review minutes of past board meetings to see if there is any truth to the differences over “values ​​and ethics” outlined in the letter from Chakraborty, who left his post last week, a person told Reuters.

Why did Atanu Chakraborty resign?

Atanu Chakraborty, in an interview to CNBC TV18, revealed that the main reasons behind his shock resignation were mis-selling of AT-1 bonds leading to backlash from regulators and poor performance of HDFC Bank.

Chakraborty said personal differences with the management were “exaggerated” and the problem was not “long-distance”, adding that “incompatibility” over values ​​and ethics led him to resign.

He explained that the mis-selling of AT-1 bonds was deemed a “technical issue” by the management and action was taken after Indian and Dubai regulators raised the issue for eight years.

“I think these behavioral problems (caused by mis-selling) should not arise… Strict enforcement should ensure that even if they do arise, they are nipped in the bud. But if they are called technically, it leaves some leeway,” he said.

He also regretted that HDFC Bank’s “poor performance” was another reason behind his resignation. He cited the low share prices, the low share of cheap current and savings account deposits, and the high cost/income ratio as the reasons.

He also said that it was the duty of independent directors like himself to ensure that the bank performed better.

Chakraborty, who was appointed part-time chairman in April 2021 and reappointed from May 2024 to May 4, 2027, oversaw HDFC Bank’s $40 billion merger with mortgage lender HDFC Ltd, creating a financial services giant.