Kolkata: On Friday, HDFC Bank shares were down 1.70%. On Thursday, investors panicked at the news of part time chairman Atanu Chakraborty abruptly resigning citing ethical concerns and triggered a slide in the blue chip stock which plunged by up to 8.7% and touched a 52-week low of Rs 770. In the later stages it recovered some ground about 5% lower. The fall of the stock on a day when the broad indicators are rising perhaps indicates that investors are still not sure about the state of affairs in India’s largest private sector bank. The sudden development also triggered a 7%–8% plunge in the HDFC Bank ADRs.
In order to quell concerns, the top management of the bank including MD and CEO Sashidhar Jagdishan; deputy MD Kaizad M Bharucha, new chairman Keki Mistry and two directors Bhavesh Zaveri and V Srinivasa Rangan spoke to the media. Mistry who has replaced Chakraborty with immediate effect, said that the board of he bank was united and there was “no governance-related issue in the bank.”
Speaking to major shareholders
“As the management team and board, we stand united. The management will be speaking to all major shareholders during the next one or two days. Whatever fears are there in people’s mind will be addressed. I don’t believe that there is any governance-related issue in the bank. Getting the trust of investors back is a matter of time and I am sure people will understand,” Mistry was quoted as saying. he also said that the banking regulator is fully aware of the situation and has not highlighted any issue that the management needs to address.
RBI support
Following Chakraborty’s resignation, the RBI on Thursday issued a statement where it expressed satisfaction with the way the bank is being run. Jagdishan said that two wholetime members and two independent directors briefed RBI on the matter on March 18. “The RBI has been supportive and the testimony to this is that it gave approval to the appointment of the new interim part-time chairman quickly. This is because it has a fair measure of confidence and support in the institution. The RBI followed up today (Thursday) with a statement,” said Jagdishan.
Incidentally, the nomination and remuneration committee of HDFC Bank is supposed to meet in about a month and decide on a fresh term for CEO Jagdishan. This decision, after an approval from the board, has to be sent to RBI.
Constant regulatory supervision
The MD and CEO also highlighted the level of regulatory supervision, both offsite and onsite, that the bank is subjected to. “Not just inspection, there are regular thematic supervisions by the RBI, a primary regulator, and some ancillary regulators,” he told the media. “When you look at this comprehensively and the intensity at which these levels of supervision come, we, on the board and in management, believe there should not be any surprises and we are reasonably confident about the rigour, ethos, and confidence with which our controls are working,” added Jagdishan.
Mistry also emphasised that there was concern about deposits moving away. “There is no governance issue in the bank from a financial perspective and, for that matter, from any perspective. And therefore to my mind, the deposit-mobilisation plan is on schedule and it’s something the board will keep managing,” said the chairman.