Problems at HDFC Bank have once again drawn attention to issues of leadership continuity and how creditors monitor the transfer of top-level authority, reports Raghu Mohan.
In May 2023, the then Governor of the Reserve Bank of India (RBI), Shaktikanta Das, held meetings with the boards of directors of public and private banks. These unprecedented one-day interactions allowed Deputy Governors and executives from the Supervision Department, Regulation Department, and Enforcement Department to discuss matters related to governance, ethics, the role of boards of directors, and supervisory expectations. This procedure was repeated in 2024.
Three years later, HDFC Bank found itself in the spotlight, caught up in a whirlwind of previously noted problems. Firstly, Atanu Chakrabarti resigned as the bank's chairman. In his resignation, he stated: 'Some events and practices within the bank that I observed over the last two years do not align with my personal values and ethics.' However, the publication Mint Road noted that 'based on our periodic assessment, there are no significant concerns recorded regarding his conduct or management. The bank remains well-capitalized, and its financial position remains satisfactory with sufficient liquidity.'
Furthermore, the HDFC Bank board of directors, under the new chairman Rajiv Kumar, imposed a fine of 1 lakh rupees on each of Sashidhar Jagdishan, the Managing Director (MD) and Chief Executive Officer (CEO) of the bank, along with two of his senior colleagues: Srinivasan Vaidyanathan, the Chief Financial Officer, and Arvind Vohra, Head of Retail Assets Group, in July this year. This was the first such measure in India Inc. It was clarified that based on the findings and recommendations of the Special Disciplinary Committee of independent directors, the board concluded that 'the conduct of the involved employees constituted an abuse of business authority, rather than malicious action, personal enrichment, or improper motive.' Jagdishan did not resign, and there was no public information suggesting he was not seeking a third term (his second ends next month, October 26).