Too Big are more equals

Big Individuals/Banks' Board/Directors are more equals*

1. Ex-Chairman of HDFC Bank Ltd: Last week, the then part-time Chairman (ex-chairman) of HDFC Bank Ltd.,(the bank) created a storm/bloodbath in stock exchanges by his statement that “certain happenings and practices within the bank that I have observed over last two years, are not in congruence with my personal Values and Ethics”. He further quoted the above as the “basis” for his decision to resign from his position as Part- time Chairman and Independent Director on the Board of HDFC Bank. He did not elaborate further. In the last two years,

(i)           RBI fined the bank for ₹ 1 Cr. for violating regulations relating to interest rate on deposits, recovery agents and customer service (Sep 24)

(ii)      SEBI issued an administrative warning for non-compliance with merchant banking regulations. (Dec 24)

(iii)     Dubai Financial Services Authority stopped the bank’s Dubai-based entity from on-boarding new clients on concerns over the services being offered to clients not yet on-boarded and certain issues with on-boarding practices. (Sep 25)

(iv)         RBI fined the bank for ₹ 91 lac for using multiple benchmarks for the same loan category and KYC violations.(Nov 25)

If all of the above or one of the above or any other lapse, not known to the public, affected 'the personal values and ethics' of the ex-chairman,  one is curious to know whether the ex-chairman raised the issues in the board and whether the replies from the management were to his satisfaction. But the transcript of the audio conversation, the board had with the analysts and investors on 19^th Mar’ 26, did not indicate any such issues having been discussed in any of the board meetings. In his resignation letter, the ex-chairman expressed his gratitude to all the members of the board and also praised the “great amount of energy and verve in the middle & junior levels of the organization, that should form the core of a reimaged organization”. (Is the praise about middle and junior levels, should be interpreted otherwise. I do not know) The chairman belong to the Gujarat Cadre of 1985 batch of IAS Officers. He worked in various capacities in the state and central governments for more than three decades including as Secretary of Department of Economic Affairs in the Central Government. He was in his second term with the bank, which incidentally is the largest private sector bank in India and ranks number one in market capitalization among all banks in India. A person with the background of such an enviable rich experience in all sectors of the economy including economics/finance ministry departments of the central government and privileged to serve the largest private sector bank of India, (both during pre and post merger of the group's  NBFC arm HDFC Ltd with the bank) for more than five years prior to resigning, is definitely not (in the normal course) expected to make ‘random remarks’ and term such remarks as the ‘basis’ for his resignation. He should have been more explicit, if he wanted the investors to be aware of certain issues related to 'ethics'. We may not be able to ask/get answers, as certain individuals are more equals.

2. The Board: The ex-chairman indicated in his letter that his resignation letter is “with effect from its Date of its consideration by Board of HDFC Bank”. Since the letter indicated that his decision was due to “certain happenings and practices within the bank, that are not in congruence” with his “personal Values and Ethics”, the board is entitled to convene a board meeting and invite the chairman to elaborate, before ‘considering’ the resignation letter. As per the statement made by the MD & CEO in the audio conference with the analysts and investors on 19^th Mar’ 26, the biggest treasure of the bank is the trust and integrity value system that the bank has built collectively with the members of the board (each of them are extreme professionals@). 

(@I must admit that the after reading  the high profile and glorious achievements of the independent and non-independent directors in the board, I was pensive for some time, as I felt much inferior to comment on the above subject. But I forced myself somehow to write on the issue).

The directors, who responded to the investors and analysts in the above meeting described the entire issue as 'baffling'. In that scenario, considering the huge negative impact the contents of the letter might create in the market/financial system, everyone expected the professional board, to exercise the above option. But the board did not. No one may be able to find the answer for not exercising this option, as big boards are more equals

3. The Regulator: RBI was professional in its reply “HDFC Bank is a Domestic Systemically Important Bank (D-SIB) with sound financials, professionally run board and competent management team. Basis our periodical assessment, there are no material concerns on record as regards its conduct or governance. The bank remains well-capitalized and the financial position of the bank remains satisfactory with sufficient liquidity”. 

As D-SIBs are more equals in a financial system, RBI’s clarification was more apt and considered absolutely essential to calm the market.

Conclusion: After the new part-time Chairman is identified by the bank and approved by the regulator, the issues that affected 'the personal values and ethics' of the ex-chairman may peter out in due course. That the market capitalization declined by more than Rs.1 lac cr., which has no bearing on the financials of the bank, but only on investors, will also be forgotten. Of course, no one will be able to 'find answers to the remarks' referred to as the ‘basis’ for the resignation by the ex-chairman. The hard truth is 

"Big Individuals/Board/Organizations are more equals"  

Regards,

V.Viswanathan
Retd. CGM, e-SBT

24th March 2026.

 *Some are more equals - George Orwell's 1945 novel Animal Farm.