HDFC Bank's governance, financial metrics hold well: InGovern Research

InGovern says HDFC Bank's governance and financial metrics remain strong despite Atanu Chakraborty's exit, with RBI also ruling out any material concerns

HDFC Bank's governance standards and financial metrics remain strong, and investors have no reason to worry about its financial strength or leadership, according to proxy advisory firm InGovern Research. This comes nearly a month after the lender's former Part-time Chairman Atanu Chakraborty's abrupt exit had sparked concerns on the matter. 

“The incident was a governance stress-test at a big bank, not a breakdown. The response matches how global peers and leading banks manage leadership exits: leadership continuity, external review, and clear communication, rather than panic driven change," InGovern said in a report. Previously, the Reserve Bank of India (RBI) had also clarified that there were no material concerns regarding governance or conduct at HDFC Bank. “HDFC Bank is a Domestic Systemically Important Bank (D-SIB) with sound financials, professionally run board and competent management team. Based on our periodical assessment, there are no material concerns on record as regards its conduct or governance,” the regulator said in a statement after Chakraborty’s exit. 

A week after Chakraborty’s resignation, the bank’s board appointed external law firms to review Chakraborty’s resignation letter, in which he alleged that certain “happenings and practices” at the bank were not in congruence with his values and ethics. The appointment of external law firms for an independent professional investigation is also to give all stakeholders a reassurance that there is nothing wrong from a governance standpoint. 

Chakraborty later stated that his resignation was not triggered by any single issue. Instead, he said, it stemmed from a growing “incongruence” between the bank’s practices and his own values and ethics over the past two years. Chakraborty said a range of concerns had contributed to his decision, including the misselling of Additional Tier-I (AT1) bonds in Dubai, the underperformance of the bank’s share price, subdued credit growth, low current and savings account deposits, and a high cost-to-income ratio. 

Two days after Chakraborty’s exit, three senior executives were asked to leave by the bank due to misselling concerns related to the Dubai issue. “The bank identified certain gaps in client-onboarding requirements at its DIFC branch in the UAE and has completed a detailed and objective review of the matter. Appropriate remedial actions have been taken in line with internal policies. Personnel changes have been undertaken along with appropriate action as per the bank’s conduct regulation,” it had said in a statement. 

From a governance perspective, HDFC Bank demonstrates a robust and well-functioning board structure, with no immediate red flags arising from board composition or oversight mechanisms, the proxy advisory firm noted. 

Overall, the board structure appears consistent with global practices for large systemically important banks, and provides a stable foundation for continued oversight, risk management, and shareholder value creation, it added. 

Additionally, the report highlighted that the senior management is well seasoned and stable, with defined, function specific leadership under the chief executive officer (CEO), rather than a fragmented one. The absence of recent, high profile CXO exits around the chairman resignation event supports the narrative that the chairman’s resignation episode is personality focused, rather than a broader management credibility risk or governance risk, it said. 

A governance concern would become materially more serious only if the resignation of the former part-time chairman was followed by additional KMP exits, or regulatory action and the absence of such events so far, suggests the situation is manageable, InGovern said. 

“The bank should quickly put out the findings by the external lawyers with the review outcomes. The bank should also continue its practices by regular investor engagement and disclosures” said Shriram Subramanian, founder and managing director of InGovern. 

India's largest private bank saw its deposits grow 14.4 per cent year-on-year (Y-O-Y) in the fourth quarter of financial year 2025-26 (Q4FY26), according to a recently released business update. Sequentially, it grew 8.6 per cent. Advances, on the other hand, grew 12 per cent Y-o-Y, and 4.1 per cent sequentially.

 

“The stock has come under pressure following the recent issues surrounding the exit of the Chairman. However, we believe fundamentals remain strong. Robust deposit growth and a materially lower loan-deposit ratio (LDR) should be viewed positively by investors. Sustainable return on assets (ROA) is around 1.9-2.0 per cent, while the stock’s valuation at ₹1.3x FY28E core P/BV appears attractive," said Macquarie Research in a report, adding that key risks include a slowdown in deposit growth and the emergence of further corporate governance issues. 

 

HDFC Bank will announce its January-March earnings on Saturday.