‘No merit’ in Chakraborty’s claims: Personal ethics talk sans details raises questions

By Jag Jivan 

A recent opinion piece published in The Quint by Subhash Chandra Garg has raised questions over the circumstances surrounding the resignation of Atanu Chakraborty from HDFC Bank, with Garg stating that the exit “raises doubts about his own ‘ethics’.”

Garg, currently Chief Policy Advisor at Subhanjali and former Secretary of the Department of Economic Affairs, Government of India, writes that the Reserve Bank of India (RBI) appears to find no substance in Chakraborty’s claims, noting, “It is clear the RBI sees no merit in Atanu Chakraborty’s wild and vague assertions.”

Chakraborty, a retired Indian Administrative Service (IAS) officer of the Gujarat cadre who succeeded Garg as Economic Affairs Secretary in July 2019, had been appointed part-time chairperson and independent director of HDFC Bank in May 2021. His appointment marked a departure from the bank’s usual practice of appointing former central bankers, such as Shyamala Gopinath, who preceded him. While other private lenders like Axis Bank and ICICI Bank had previously appointed retired IAS officers as part-time chairpersons, HDFC Bank had largely relied on individuals with banking or regulatory backgrounds.

Chakraborty tendered his resignation on 18 March (dated 17 March), citing “certain happenings and practices within the bank” over the past two years that were “not in congruence with my personal values and ethics,” while also stating that there were “no other material reasons” for his departure. Garg questions this formulation, arguing that invoking “personal values and ethics” without specifying the underlying issues raises concerns about transparency and corporate governance.

“Is it fair for a part-time, non-executive, independent director to invoke ‘personal values and ethics’—without even spelling out the grounds for resignation—despite the potential for significant damage to shareholder value?” Garg asks. He further adds that such vague assertions, without clarification, risk undermining confidence in a systemically important bank.

Garg also revisits the circumstances of Chakraborty’s appointment, suggesting that his lack of direct experience in banking, banking policy-making, or regulation made the choice unusual. He notes that the bank, historically associated with veteran banker Deepak Parekh, may have selected Chakraborty to help navigate relations with the government and regulators, particularly in the context of the merger between Housing Development Finance Corporation (HDFC Ltd) and HDFC Bank in July 2023.

Drawing on his own experience working alongside Chakraborty in the Ministry of Finance, Garg alleges a pattern of decision-making that emphasised personal authority. He cites past policy disagreements, including those related to the merger of Power Finance Corporation (PFC) and REC Limited, as well as the dilution of a proposed stake sale in Life Insurance Corporation of India (LIC) during the Union Budget 2019–20 process.

According to Garg, Chakraborty’s resignation statement has created “considerable damage” to the bank’s reputation by making “wild and vague allegations” without elaboration. He argues that corporate governance concerns must be articulated clearly and not framed in terms of undefined personal standards. “Chakraborty must explain what corporate values and ethics did HDFC Bank, or its board members, violate,” Garg writes, adding that stakeholders—including shareholders, depositors, and regulators—deserve clarity.

The RBI moved swiftly following the resignation, accepting it and issuing a statement that there were “no material concerns on record as regard its conduct or governance” at HDFC Bank. The central bank also appointed Keki Mistry as interim chairperson.

Garg interprets the RBI’s response as a clear indication that the regulator does not view Chakraborty’s assertions as credible. “It seems his conduct is less ethical and value-based,” he writes, while emphasising that the episode is not as “routine” as Chakraborty has suggested in subsequent remarks to the media.

He concludes that Chakraborty’s claims and conduct warrant further scrutiny, stating that “his conduct and allegations as well as his personal values and ethics need to be enquired into—and the truth found out,” while also reiterating that, in light of the RBI’s position, there is no reason for stakeholders to have concerns about HDFC Bank based on the resignation alone.