No governance lapses found in HDFC Bank, says RBI

Governor Sanjay Malhotra says board minutes reviewed; no concerns on ethics and governance

Mumbai: The Reserve Bank on Wednesday said HDFC Bank’s board meeting minutes and other records are studied as part of supervision exercise, and reiterated that the largest private sector lender has not been found wanting on ethics and governance.

“I would like to reiterate that at no point during our supervision or after examining their records did any governance or conduct-related material issue come to our notice. Under our regular supervision, board minutes are also reviewed. Copies of the minutes are provided to us,” RBI Governor Sanjay Malhotra said, replying to a specific question on HDFC Bank.

It can be noted that the resignation letter did not mention any specific reason beyond incongruence on ethics and values, and the bank’s other board members also said they were “baffled” because Atanu Chakraborty did not cite any particular instances during their discussions either.

This led to questions over the efficacy of the current set of rules that led to the resignation of the bank’s former chairman Atanu Chakraborty last month that was followed by a sharp correction in share prices.

The RBI brass on Wednesday said there is no need for a review.

“As for whether there is a need to change guidelines or directions, at present, we do not feel such a need. However, if in future it is felt that any change or new rule is necessary and you know that Sebi already has directives in this regard, then we will not hesitate to introduce additional directions if required,” the Governor said.

Deputy Governor Swaminathan J added that the central bank is not averse to driving changes in the rule book, but added that it does not see merit in the same. “At this point in time, there is no event that warrants a macro prudential measure or a regulatory tweak,” he said.

Meanwhile, commenting on instances of frauds being reported with lenders such as IDFC Bank and Kotak Mahindra Bank in context of the State government accounts, Malhotra opined this is a criminal activity done by a set of colluding individuals, and added that there is no need to change any rules to check such activity.

“I want to assure everyone that the banking system is very resilient, it’s very safe, strong,” the Governor said.

Swaminathan said these are entity-specific developments that do not pose any systemic risk at this point in time.