Shares of HDFC Bank declined nearly 3 percent in Friday’s trade, reversing recent gains, after fresh concerns emerged around corporate governance and institutional investor positioning. The stock slipped to an intraday low of Rs 759.25 on the NSE, reflecting a combination of profit booking and emerging uncertainty around regulatory scrutiny.

The immediate trigger for the decline was a report indicating that Securities and Exchange Board of India (SEBI) has initiated a preliminary review of the resignation letter submitted by former part-time chairman Atanu Chakraborty.

According to sources cited in the report (https://www.reuters.com), the regulator is examining whether there were any violations of rules governing directors of listed entities, particularly around disclosure standards and fiduciary responsibilities.

Chakraborty, in his resignation communication, had alluded to “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics. While the letter did not provide specifics, the phrasing has drawn attention from both regulators and investors, given the bank’s stature in India’s financial system.

In response, HDFC Bank had earlier stated that it has engaged external law firms to independently assess the concerns raised. However, Chakraborty reportedly indicated that he had not been contacted by these firms, suggesting that the review process may still be in early stages.

Separately, global brokerage Jefferies exited its position in the bank and trimmed its India exposure following the resignation. While the brokerage’s move has not been officially linked to governance concerns, the timing has amplified market nervousness. Institutional exits, particularly from large foreign investors, often act as sentiment triggers in widely held stocks like HDFC Bank.

The stock had already seen volatility earlier, falling nearly 8.7 percent in the sessions following the emergence of the resignation letter, wiping out approximately Rs 1.35 lakh crore in market capitalisation over three trading days. The latest decline suggests that the overhang of uncertainty remains unresolved.

From a regulatory standpoint, the reported SEBI review appears focused on whether there were lapses in disclosure or awareness among board members regarding any material issues referenced in the resignation letter. The examination is also expected to assess whether such information, if material, was adequately documented and communicated to stakeholders as required under listing norms.