The unexpected resignation of Atanu Chakraborty as chairman of HDFC Bank has exposed internal tensions at India’s largest private lender, raising investor concerns and wiping out nearly $16 billion in market value.
Chakraborty stepped down earlier this month, citing differences over “values and ethics,” though he did not provide further details. His exit triggered a sharp selloff in the bank’s shares, which dropped around 12% over three days before partially recovering.
Sources familiar with the matter said the bank has faced internal rifts in recent years, including disagreements between Chakraborty and CEO Sashidhar Jagdishan over strategy and human resources policies. These tensions have now placed the CEO under increased scrutiny.
Both the bank and India’s banking regulator have denied any governance or financial irregularities. However, the situation has unsettled investors, particularly as the bank has underperformed compared to its peers in recent years.
Chakraborty, who became chairman in 2021, was said to have taken an unusually active role in operational matters, including intervening in executive performance evaluations—traditionally the CEO’s domain. He also reportedly opposed a proposed investment by Japan’s Mitsubishi UFJ Financial Group in the bank’s consumer finance arm, a plan that was ultimately shelved.
Meanwhile, questions have also emerged about internal dynamics within the top management team. During a recent analyst call, Jagdishan dismissed concerns of a power struggle, expressing confidence in his colleagues, including Deputy Managing Director Kaizad Barucha.
The leadership uncertainty comes at a challenging time for the bank, as broader economic pressures—including geopolitical tensions in the Middle East—threaten to slow credit growth in India’s banking sector.
Additionally, lingering concerns remain over the bank’s $40 billion merger with HDFC Ltd in 2023. While the merger significantly expanded the bank’s asset base, it also brought a relatively smaller deposit pool, squeezing margins and impacting growth. The bank’s lending margin has fallen to 3.35% from 4.1% prior to the merger, while its loan-to-deposit ratio has risen sharply.
Market analysts say the bank is currently facing execution challenges rather than a fundamental leadership crisis. However, they warn that continued underperformance could lead shareholders to demand stronger accountability and potential leadership changes.
With CEO Jagdishan’s term set to run until October 2026, investors will be closely watching how the bank navigates its internal challenges and restores confidence in its long-term performance.