New Delhi/Mumbai, Mar 19 (PTI) HDFC Bank's non-executive chairman Atanu Chakraborty abruptly resigned, citing differences over "values and ethics" - a ground that the management of the country's second-largest lender said was baffling, as the former bureaucrat offered no specific instance despite repeated requests.

Keki Mistry, a veteran of the HDFC Bank Group, was appointed as the interim chairman, following the resignation, said there may have been "relationship issues" between Chakraborty and the executive leadership, but found no "substantive" concerns behind the departure.

Mistry emphasised that the bank's operations and governance remain stable.

This is the first time that the part-time chairman of HDFC Bank left mid-way, raising concerns over its functioning.

"Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal values and ethics. This is the basis of my aforementioned decision," he said in his resignation letter dated March 17.

In a letter addressed to the Chairman of Governance, Nomination, Remuneration Committee (NRC) HK Bhanwala, Chakraborty said, "There are no other material reasons for my resignation other than those stated above".

In a late evening Wednesday filing, HDFC Bank said Chakraborty has on March 18, 2026, tendered his resignation as the Part-time Chairman and Independent Director of the Bank with immediate effect.

It is to be noted that Chakraborty was appointed part-time chairman effective May 5, 2021, almost a year after retirement as Economic Affairs Secretary.

His term was extended for another three years in 2024 till May 4, 2027.

Chakraborty, a 1985 batch IAS officer of Gujarat cadre, retired as Secretary of the Department of Economic Affairs in April 2020. Prior to that, he was Secretary of the Department of Investment and Public Asset Management (DIPAM). Both departments come under the Finance Ministry.

Chakraborty became chairman during the reverse merger process of the bank with the parent entity HDFC Ltd, a leading mortgage firm in the country.

The merger of HDFC Ltd with HDFC Bank became effective on July 1, 2023, creating a financial behemoth with a combined balance sheet of over Rs 18 lakh crore.

Taking note of the exit, the RBI said there were no material concerns on record as regards the bank's conduct or governance.

"HDFC Bank is a Domestic Systemically Important Bank (D-SIB) with sound financials, a professionally run board and a competent management team. Basis our periodical assessment, there are no material concerns on record as regards its conduct or governance," the Reserve Bank of India (RBI) said in a statement.

The statement emphasised that the bank remains well-capitalised and its financial position remains satisfactory with sufficient liquidity.

Shares of HDFC Bank dived over 5 per cent on Thursday following the exit of the bank's chairman.

The blue-chip stock tumbled 5.13 per cent to settle at Rs 799.70 on the BSE, trimming some of its sharp early losses. During the day, it tanked 8.41 per cent to Rs 772 -- its 52-week low.

However, the finance ministry said the bank is a "strong institution with strong fundamentals".

Financial Services Secretary M Nagaraju said the RBI has already issued a statement in this regard.

"HDFC Bank is a strong institution with strong fundamentals," he said.

Addressing reporters after the surprise move, HDFC Bank MD and CEO Sashidhar Jagdishan noted that a majority of the board members said they are "baffled" by Chakraborty's move because he did not offer any specific concerns that he is alluding to in the resignation letter.

Stressing that there are no issues at the bank, its management exuded confidence that it will be able to recoup the hit to its reputation in due course.

Jagdishan said, "Every board member" tried to persuade Chakraborty to take back his resignation or elaborate on the concerns so that the same can be readdressed, but he did not relent.

The resignation dated March 17 (Tuesday) came up for discussion during a meeting of the nomination and remuneration committee of the board on Wednesday, and at about 7 PM, four board members, including two whole-time members and two independent members, initiated a dialogue with the RBI about the happenings, Jagdishan said.

There were also attempts to "take back some of the language" in the letter, Jagdishan said, suggesting that the lack of success on it led to a briefing to the RBI, and the regulator was kind in appointing Keki Mistry as the interim chairman for three months.

Amid widespread speculation on the differences between the management and Chakraborty, Mistry alluded to a "personal relationship issue", but asked reporters not to get into the same.

To a query on concerns surrounding HDFC Bank's merger with parent HDFC, its deputy managing director Kaizad Bharucha said the merger has accrued benefits by way of increased savings account relationships of home loan borrowers, and added that the average balances in such accounts are 2.5 times the bank average.

Bhanwala, who heads the NRC, clarified that although the letter is dated Tuesday, the board learned of the matter only on Wednesday during an NRC meeting.

HDFC Bank is the latest private sector bank to have hit leadership issues. In the past, ICICI Bank's then CEO Chandra Kochhar was accused of fraudulent loan practices, while Axis Bank's former chief executive Shikha Sharma had her term truncated on regulatory concerns over rising bad loans. PTI DP AA ANZ DP BAL BAL

Corporate governance concerns after a chairman's ethics based resignation prompt interim leadership and regulator engagement. An abrupt resignation by the part time non executive chairman citing differences over values and ethics-without specific allegations-triggered board engagement, a Nomination and Remuneration Committee disclosure, appointment of an interim chairman, and regulatory consultation; the bank and regulator publicly reported no material governance concerns while market confidence reacted to the leadership change.