Mumbai, March 30 The reasons for his resignation were the mis-selling of AT-1 bonds, which led to criticism from regulators, and the under-performance of HDFC Bank, the country's largest private sector lender, according to former chairman Atanu Chakraborty on Monday.
He said that personal differences with the management were "exaggerated" and were not the primary reason for his resignation earlier this month, emphasizing that "discrepancies" in values and ethics led him to leave the board.
In an interview with CNBC TV-18, Chakraborty lamented that the bank's management viewed the mis-selling of the AT-1 bonds as a "technical issue," and that action was taken eight years later, after regulators in Dubai and India had raised the issue.
"I believe that these conduct issues (arising from the mis-selling) should not occur... close supervision should ensure that if they do arise, they are addressed immediately. However, if they are considered a 'technical issue,' it leaves room for ambiguity," he said.
Such conduct leads to reputational damage, Chakraborty said, reminding that people come to the bank for advice and that compensation practices must align with value systems to prevent mis-selling.
"The incentive structures, the oversight of the management and the board should ensure that they are aligned with the interests of depositors, shareholders, and the public," he said.
It is worth noting that in September last year, authorities in Dubai had barred HDFC Bank from adding new customers at its branch in the Dubai International Financial Services Centre as a penalty for the alleged mis-selling of Credit Suisse's additional tier-1 bonds, which were written off in 2023.
In his resignation letter, Chakraborty mentioned values and ethics as among the factors that influenced his decision to leave a year before the end of his term.
Chakraborty also said that the bank's under-performance, including low share prices, lower deposits in cheaper current and savings accounts, and a high cost-to-income ratio, led to the decision, and made it clear that the merger of its parent company, HDFC Ltd, with itself had nothing to do with these factors.
He also said that it is the duty of independent directors like himself to ensure better performance for the bank.
In response to comments from the capital markets regulator, Sebi, which advised independent directors to act responsibly and not make insinuations, Chakraborty said that he mentioned "discrepancies" in values and ethics in his letter, and advised people to consult a dictionary to understand if this is akin to an insinuation.
Citing confidentiality, the former bureaucrat declined to answer questions about whether he had informed financial regulators about his views on values and ethics, or if he had raised the issue at the board level.
He also denied that his resignation led to a sharp correction in the bank's stock price, adding that the Iran war and an unfavorable move by the US Fed had affected the markets.
The decision to list HDB Financial Services was driven by a RBI mandate to go for an IPO within a timeframe, Chakraborty said, seeking to settle speculation if a potential deal with Japan's MUFG did not have his backing and was among the reasons for the bank management's differences with him.
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