Following rumors that it asked three senior officials to leave the bank due to their alleged role in the mis-selling of Credit Suisse’s AT 1 bonds, HDFC Bank shares faced fresh selling pressure. On Monday, March 23, shares of HDFC Bank, the biggest private sector lender in the nation, dropped for the fourth consecutive session. HDFC Bank shares have fallen as much as 10.53% over the past four trading sessions, reaching an intraday low of ₹756.30 on the National Stock Exchange (NSE). The shares fell as much as 3.09% during intraday trading.
According to NSE statistics, HDFC Bank’s market capitalization has dropped by ₹1.34 lakh crore to ₹11.63 lakh crore over the last four sessions.
Following rumors that it asked three top officials to quit the bank due to their suspected involvement in the mis-selling of Credit Suisse’s Additional Tier 1 Bonds, HDFC Bank shares saw fresh selling pressure on Monday.
Sampath Kumar, group head of branch banking, Harsh Gupta, executive vice president, Middle East, Africa, and NRI onshore business, and Payal Mandhyan, senior vice president, were all fired by HDFC Bank, according to a Moneycontrol article.
HDFC Bank is reportedly looking into claims that its workers misrepresented high-risk AT1 bonds from its Dubai branch.
Days have passed since Atanu Chakraborty, the organization’s non-executive chairman, abruptly quit on March 18 due to disagreements over “values and ethics.”
After Chakraborty resigned, HDFC Bank Group veteran Keki Mistry was named interim chairman. He stated that there might have been “relationship issues” between Chakraborty and the senior leadership but that there were no “substantive” reasons for the departure.
Mistry emphasized the stability of the bank’s governance and operations.
This is the first time that HDFC Bank’s part-time chairman resigned in the middle, raising questions about how the bank operates.
What are AT1 Bonds?
In accordance with Basel III regulations, banks issue perpetual, high-yield bonds known as Additional Tier 1 (AT1) bonds to increase their core (Tier 1) capital. Although banks usually include call options that enable investors to redeem the bonds after a predetermined timeframe, investors may not receive their principal back on a predetermined timeline due to the bonds’ lack of a defined maturity date.
Because they could be written down or turned into stock if the issuing bank’s capital drops below necessary regulatory criteria, these securities involve a higher risk.
HDFC Bank shares fell 2.11% to ₹764 as of 9:36 am, trailing the NIFTY50 index’s 1.66% decline.
Disclaimer: This article is purely for informational purposes and should not be considered investment advice from business Connect magazine. Please consult with a financial advisor before making any investment decisions.
1. Why are HDFC Bank shares falling?
HDFC Bank shares are under pressure due to reports of alleged mis-selling of Additional Tier 1 Bonds (AT1 bonds) and internal actions taken against senior officials. This has raised concerns about governance and compliance.
2. How much have HDFC Bank shares fallen recently?
The stock has dropped over 10.5% in the last four trading sessions, hitting an intraday low of ₹756.30 on the National Stock Exchange.
3. How much market value has HDFC Bank lost?
HDFC Bank’s market capitalization has declined by approximately ₹1.34 lakh crore, falling to around ₹11.63 lakh crore.
4. What is the controversy around AT1 bonds?
The issue relates to the alleged mis-selling of high-risk AT1 bonds linked to Credit Suisse. These bonds are complex financial instruments and carry higher risks, which may not have been properly communicated to investors.
5. What action has HDFC Bank taken?
According to reports, the bank asked three senior officials to leave due to their suspected involvement in the issue. The bank is also investigating the matter internally.
6. Who recently resigned from HDFC Bank?
Non-executive chairman Atanu Chakraborty resigned on March 18, reportedly due to differences over values and ethics.
7. Who is currently leading HDFC Bank?
Veteran banker Keki Mistry has been appointed as the interim chairman following Chakraborty’s resignation.
8. What are AT1 bonds?
AT1 (Additional Tier 1) bonds are perpetual, high-yield instruments issued by banks under Basel III norms to strengthen their core capital. They carry higher risk because they can be written down or converted into equity during financial stress.
9. Why are AT1 bonds considered risky?
AT1 bonds:
- Do not have a fixed maturity date
- Can be written off during financial distress
- May be converted into equity if capital levels fall
This makes them riskier compared to regular bonds.
10. Should investors be worried about HDFC Bank?
While the recent developments have impacted sentiment, the bank has stated that its governance and operations remain stable. Investors should monitor updates and consult financial advisors before making decisions.
11. How did HDFC Bank shares perform compared to the market?
HDFC Bank shares fell around 2.11% in early trade, underperforming the broader NIFTY 50, which declined by about 1.66%.
