MUMBAI: Reserve Bank governor Sanjay Malhotra has said the central bank has not found any material or governance concerns in HDFC Bank after its chairman stepped down citing unspecified ethical and moral disagreements with the management.
The governor was responding multiple questions about issues in a few private sector banks and especially at HDFC Bank where its past part-time chairman Atanu Chakraborty had resigned citing unsubstantiated ethical and moral issues at the bank, in the past two years, on March 18.
When asked specifically whether the governor meant there are no issues at the country’s second largest lender after analysing the submissions the bank made and also the minutes of the recent board meetings, Malhotra said: “Based on our general supervision and the analysis, we have not found any material or governance concerns in HDFC Bank.”
Malhotra also dispelled any concerns about the banking system as whole saying the extant banking laws are quite clear and that RBI does not see any need for change now.
"If there is any need, we will consider,” he told reporters at the customary post-policy press briefing Wednesday where the central bank left the key policy rates unchanged and also maintained the neutral policy stance.
“The laws are quite clear, don’t see any need for change. If there is any need, we will consider,” Malhotra said during a post-policy press briefing.
The governor also said the regulations are safe and resilient, and equity specific events do not post any threat to the long-term health of the banking sector. “From the banking side as a whole, we are not seeing any systemic concerns about their profitability, and their health,” he added.
The central bank plans to overhaul guidelines for bank boards to shift their focus more toward policy decisions rather than day-to-day operations, Malhotra said.
In the changes to regulatory policies announced earlier in the day, the governor said it will be reviewing matters placed before the boards of banks.
“In an endeavor to enable boards to utilize its time effectively, and to facilitate a more focused and qualitative engagement on strategy and risk governance, the Reserve Bank has undertaken comprehensive review and rationalization of all such instructions. Draft directions in this regard will be issued shortly for public consultation,” the governor said earlier.
It can be noted that the matters to be placed before the bank boards, along with their periodicity, are determined by the boards themselves, guided by the seven broad themes prescribed by the Reserve Bank. Meanwhile, the Reserve Bank has also mandated certain policies and matters to be placed before the board for approval, review, or information.
Some reports said Chakraborty’s involvement in operational and management issues had led to friction with chief executive Sashidhar Jagdishan.
Malhotra said the review of boards was initiated following requests from banks and aims to improve how boards utilise their time.
“We propose to revise and rationalise matters requiring board attention, enabling boards to focus more on policy while leaving operational issues to management,” he said.