Shares of HDFC Bank fell as much as 9 per cent on Thursday as the market reacted to Part-time Chairman and independent director Atanu Chakraborty’s resignation. This eroded ₹1.1 lakh crore in market cap at the stock’s intraday low. He had based his resignation on the bank’s practices not being in congruence with his values and ethics, over the last couple years.

Management clarifies

Ever since, speculation has been buzzing linking the resignation with the bank’s Dubai IFC branch’s affairs and a few resignations among the senior management in the last year—such as those of CHRO, Chief of Internal Vigilance and the head of Commercial and Rural Banking. The ex-chairman’s assessment in his resignation letter that the full benefits of the merger are yet to fructify—also added fuel to speculation.

In an attempt to quell speculation, in a call with analysts, the board explained in many words that there are no material concerns as regards regulatory compliance and governance matters. Though it admitted that there were minor differences between the board and Chakraborty, there weren’t any substantial enough to warrant the resignation.

The board appeared to have little idea of the circumstances leading to the resignation. This seems a bit odd though, given the problem has been allegedly going on for a while and the choice of strong words in Chakraborty’s resignation letter that would do no good to the 30-year-old bank’s reputation.

Financially healthy

Nevertheless, the bank has been doing well financially since the merger with HDFC Ltd (in FY24) with steady growth and stable asset quality, save for the elevated credit-deposit ratio. The ratio which stands at 99 per cent now is a by-product of the merger and has been brought down from 108 per cent, as of the first quarter post the merger (Q2 FY24).

In the last quarter too, it reported a healthy profit growth of 12 per cent over Q3 FY25, a 14-per cent deposit growth and a 12-per cent advances growth. It is one of the few banks with stable long-term asset quality helping it deliver a good RoA (return on assets) of 1.9 per cent for 9M FY26. The gross and net NPA ratios are at 1.2 per cent and 0.4 per cent respectively. Capital adequacy ratio stands at 20 per cent.

Recovering from the lows, the stock ended the session with a loss of 5.3 per cent. At 2.2x book value (consolidated), the stock has valuation comfort, as against 4.1x five years ago and 3.1x before the merger.

While this news is a setback for the bank, fundamentally it is on a strong footing. RBI put a statement out to affirm that there are no material concerns and that HDFC is a well-capitalised bank with sound financials and competent management. The Department of Financial Services too endorsed this view. Investors need to note that banks are under RBI’s constant supervision and audits, the results of which are often not made public.

Given it is a systemically important bank, this issue need not be brushed aside. At the same time, the regulator’s seal of approval, the bank’s solid balance sheet and reasonable valuation should give investors comfort. Hence, investors who already hold the stock need not panic and can remain invested for the long-term.

Published on March 19, 2026