The merger between HDFC Bank and HDFC has now made the entity the fourth largest bank in the world.
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Indian stocks HDFC Bank It fell 5% on Thursday after its part-time chairman Atanu Chakraborty resigned after flagging governance and ethics concerns within the firm.
In an investor call on Thursday, part-time chairman Keki Mistry Chakraborty said the board had not been given any evidence or details of unethical practices.
“Certain incidents and practices within the bank that I have observed in the last two years are not compatible with my personal values and ethics,” Chakraborty said in his resignation letter.
Foreign institutional investors account for more than 47% of India’s largest private sector lenders. The Singapore government and Norway’s state pension fund Global are among the top foreign investors in HDFC Bank, with around 2.3% and 1.2% stake respectively.
The middle and junior levels of the firm should “form the core of the restructured organization,” Chakraborty said in his resignation letter dated March 17, which was submitted to HDFC Bank during late market hours on Wednesday.
Mistry’s appointment is a “strong firefighting move,” Deven Choksi, founder and managing director of wealth management firm DRChoksi Finserv, said in a note on Thursday.
He warned that HDFC shares could see “significant selling pressure”, advising investors to avoid “bottom-fishing” until governance concerns are addressed.
HDFC Bank and India’s banking system regulator, the Reserve Bank of India, did not immediately respond to emails seeking comment.
As of Wednesday, HDFC Bank’s market value was 13.08 trillion rupees ($140 billion), higher than the 9.95 trillion rupee valuation of State Bank of India, the country’s largest public sector lender, according to LSEG data.
