HDFC Crisis Is Beyond Law Firms

Law Firms Won’t Solve HDFC Bank’s ‘Governance Plus’ Issues

By Katya Naidu

What?

The stock price of HDFC Bank dropped over 13% since the sudden resignation of part-time chairman and independent director, Atanu Chakraborty. They hit a 52-week low and are still on a downward spiral, closing at Rs 731 on Tuesday. 

The bank has taken action against several employees over irregularities after Chakraborty’s resignation. It has also brought in independent law firms to review his resignation; it’s not likely to soothe the nerves of investors, even if it may be a step in the right direction.

“Hopefully, they will examine all issues and call out specific reasons for the resignation. The findings of the investigation must be shared with investors and must not remain only for the bank’s internal consumption,” Shriram Subramanian, founder of proxy advisory firm InGovern Research Services, told The Core. 

At the heart of the issue is the governance standards of the bank, deemed Domestic Systemically Important Banks, which can be read as too big to fail. While it received a clean chit from India's central bank, the Reserve Bank of India (RBI), and has gotten external law firms — two domestic and one US-based — to oversee its governance standards, it may not be enough. 

Why? 

While the law firms may point out discrepancies and inspect if the regulation is followed to the letter, the grey lines could remain where they are. When it comes to ethics and values, can they be measured by law firms alone? 

At least HDFC's investors don't think so. While the news of law firms improved the falling stock price, it was only temporary. In an interview on Monday with CNBCTV18, even Chakraborty pointed out that hiring law firms was more about compliance, rather than looking into governance.

“What I mentioned in my resignation letter is a larger governance and ‘governance plus’ issue, which the board themselves must introspect. No external lawyer can do that except to point whether it did meet or did not meet an audit para,” Chakraborty said.

The haze over Chakraborty’s resignation continues to linger, even after recent interviews. However, he did point out that the bank’s delay in dealing with Credit Suisse AT-1 bond misselling in its Dubai branch to its NRI customers brings regulatory focus and reputational risk to the bank. 

What Now? 

Most experts believe that the vague references to ethics and values in Chakraborty’s resignation letter are not acceptable. It needs more details on whether they have a material impact on the bank, as it has a fiduciary responsibility towards the bank’s customers, depositors, and shareholders. 

“He is not a whistleblower, and he is a part of the board, so he must have taken up these issues at the board,” said corporate lawyer Ramesh Vaidyanathan, as the co-managing partner of law firm BTG Advaya. 

As an independent director, Chakraborty should have flagged off these issues with the board, as per legal experts. “The law firm might review the minutes of the meetings of the board and committees and see if any grievances are raised; or if any ethical violations are recorded,” added Vaidyanathan.

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1 million metric tons

That’s the volume of diesel India pumped into Southeast Asia this March, marking a seven-year high, Reuters reported. Driven by the West Asia conflict, Indian refiners like Reliance Industries pivoted supply to capture surging Asian margins, effectively replacing disrupted Middle Eastern crude with discounted Russian volumes to fuel the region’s deficit.

Overview: This 7.45-million-barrel surge, with nearly half bound for Singapore, cements India’s role as a global swing supplier. As traditional exporters like China curb shipments, India has stepped in to bridge the gap.

Future: Analysts at FGE and Sparta Commodities suggest this flow could persist through August, supported by Washington’s permissive stance on Russian and Iranian oil to stabilise global energy prices.

IndiGo CEO Reset

IndiGo parent InterGlobe Aviation has appointed Willie Walsh as chief executive officer, replacing Pieter Elbers, who stepped down in March 2026 after a turbulent tenure. In a regulatory filing, the airline said Walsh will join by August 3, pending approvals.

Walsh is currently the Director General of the International Air Transport Association and was formerly CEO of British Airways and the International Airlines Group, a holding company which owns Aer Lingus, British Airways, Iberia, Level and Vueling.

The company said he will be responsible for “overall management and strategic direction.” Chairman Vikram Singh Mehta called it a “new chapter,” while managing director Rahul Bhatia said Walsh is “exceptionally suited” to lead IndiGo at a “pivotal cusp of growth.”

The government also appointed Vir Vikram Yadav, additional secretary in the Ministry of Environment, as the chief of the Directorate General of Civil Aviation (DGCA) and switched the current head, Faiz Ahmed Kidwai, to a separate ministry. It didn’t give any reason for the reshuffling.

The Lead: The leadership changes follow a December 2025 crisis, when IndiGo cancelled over 4,000 flights due to crew rostering lapses after revised duty-time rules, prompting regulatory intervention and fines from the DGCA.

The Energy Security Gamble

The West Asia war has pushed NATO to a breaking point as Secretary of Defense Pete Hegseth questioned the alliance's future following European roadblocks regarding airspace access, Reuters reported. While Iran’s latest drone strike on a Saudi crude tanker off Dubai intensified regional maritime risks, President Trump warned allies to secure their own oil, further signalling a potential American retreat from mutual defence commitments.

Catch-Up Quick: India is navigating this volatility through high-risk diplomacy. While the Indian Navy reportedly escorted the LPG tanker Pine Gas through a mined Strait of Hormuz via an unconventional Iranian route, the economic toll is mounting. The rupee has plunged to record lows near 95 per dollar as the soaring oil import bill threatens to double the current account deficit to 2.5% of GDP.

Setup: India is insulating households by extending its National PNG Drive 2.0 through June 2026 and racing to reduce reliance on vulnerable seaborne LPG. Meanwhile, round-the-clock helplines and naval escorts continue as it prioritises the safe repatriation of over 900 seafarers and nearly 6 lakh citizens from the conflict zone.

Supply Crunch Halts ARCs

Asset Reconstruction Companies (ARCs) are set for a strategic shift as security receipt (SR) recovery rates are projected to hit 90% next fiscal. This surge, driven by resolutions in real estate, roads, and power, marks a healthy phase for existing portfolios. However, total Assets Under Management (AUM) are declining as redemptions outpace new acquisitions, Crisil Ratings said in a note on Tuesday.

Context: The primary hurdle is a supply squeeze, with bank gross NPAs hitting record lows of 2.3 – 2.5%. With fewer distressed assets available, ARCs are increasingly looking toward alternative financiers.

Outcome: While the sector's recovery momentum remains strong through 2027, the road ahead depends on legislative reforms.

Price War Begins

Novo Nordisk has cut prices of its weight loss drugs Ozempic and Wegovy by up to 48% in India, as generic competition intensifies. The move follows the expiry of semaglutide’s patent on March 20, which has opened the market to cheaper copies from Indian generic drugmakers.

Setup: Dozens of local firms have launched generic versions, with some priced as low as Rs 1,300 a month and many significantly undercutting the original drugs. In response, Novo has lowered prices across doses to defend market share. 

Outcome: Novo Nordisk said it cut prices “to make these therapies more accessible,” adding that the move reflects feedback from patients and doctors.

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Fresh Misdirection from the US on a Possible End to The War

On Episode 836 of The Core Report, financial journalist Govindraj Ethiraj talks to Bhavdeep Bhatt, CEO at Northern Arc Investment Managers as well as Nikhil Sethi, National Leader Consumer Goods and Co-Lead Customer & Operations at KPMG in India.

• Fresh misdirection from the United States on a possible end to the war.

• Former BA and IATA CEO Willie Walsh to join Indigo as CEO.

• India real GDP could contract by 1%, says EY.

• Why Indian credit markets are safer and the overall investing landscape.

• 96% of Indian shoppers research online before purchase, while 46% check store inventory before visiting