HDFC Bank Dismisses Executives Over Onboarding Lapses

In a significant development following the recent resignation of Atanu Chakraborty as chairman, HDFC Bank has terminated the employment of three senior executives at its Dubai International Financial Centre (DIFC) branch, citing lapses in client onboarding procedures. The bank, India’s second-largest lender, took the action amid allegations of mis-selling Credit Suisse’s additional tier-1 (AT-1) bonds, which had previously drawn scrutiny from regulators.

According to sources, the Dubai Financial Services Authority (DFSA) had barred HDFC Bank from onboarding new clients at the DIFC branch last September following complaints of irregularities in bond sales. The bank has since conducted a detailed and objective internal review of the matter.

In an official statement, HDFC Bank said:

“Certain gaps in client-onboarding requirements at our DIFC branch have been identified and thoroughly reviewed. Appropriate remedial actions have been taken in line with internal policies. Personnel changes have been undertaken alongside corrective measures as per the bank’s conduct regulations.”

The bank reaffirmed its commitment to robust governance standards and compliance with regulatory frameworks.

Chairman Resignation Raises Concerns

The decision to dismiss executives came shortly after Atanu Chakraborty, part-time chairman of HDFC Bank, resigned effective 18 March, citing ethical concerns. This marks the first occasion a part-time chairman has left mid-tenure, raising questions about internal governance.

In his resignation letter, addressed to the Chairman of the Governance, Nomination, and Remuneration Committee, H K Bhanwala, Chakraborty stated:

“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. There are no other material reasons for my resignation beyond those stated above.”

Chakraborty, a 1985-batch IAS officer of the Gujarat cadre, had retired as Secretary of the Department of Economic Affairs in April 2020. Prior to this, he served as Secretary of the Department of Investment and Public Asset Management (DIPAM), both under India’s finance ministry. He assumed the role of HDFC Bank chairman on 5 May 2021, nearly a year after retiring from government service, and his term had been extended in 2024 until 4 May 2027.

Context: HDFC Bank and HDFC Limited Merger

Chakraborty’s chairmanship coincided with the reverse merger of HDFC Bank with its parent entity, HDFC Limited, a leading mortgage lender in India. The merger, effective 1 July 2023, created one of the country’s largest financial institutions with a combined balance sheet exceeding ₹18 lakh crore.

The recent dismissals and the unexpected resignation of Chakraborty have drawn attention to the operational and ethical oversight within HDFC Bank, signalling a potential tightening of internal governance and compliance mechanisms in the coming months.