Shares of India's HDFC Bank closed 5.11% lower on Thursday after Atanu Chakraborty, its part‑time chairman, resigned after flagging governance and ethical concerns within the institution.

During an investor call on Thursday, interim part‑time chairman, Keki Mistry said that Chakraborty had not provided the board with any evidence or details of the alleged unethical practices. Dismissing claims of an internal discord, Mistry said that the management "does and will continue to work in a cohesive manner."

"Certain happenings and practices within the bank, that I have observed over last two years, are not in congruence with my personal Values and Ethics," Chakraborty said in his resignation letter.

Foreign institutional investors own over 47% stake in India's largest private sector lender. The Government of Singapore and Norway's Government Pension Fund Global are among the top foreign investors in HDFC Bank, owning nearly 2.3% and over 1.2% stake, respectively.

The middle and junior levels of the bank should "form the core of a reimaged organization," Chakraborty said in his resignation letter dated March 17, which was submitted to HDFC Bank during late market hours Wednesday.

India's banking regulator, Reserve Bank of India, said that HDFC Bank has "sound financials" and is run by a professional board and competent management, adding that during its periodic assessment, there were "no material concerns on record as regards its [HDFC's] conduct or governance."

Mistry's appointment is a "strong firefighting move," said Deven Choksey, founder and managing director of wealth management firm DRChoksey FinServ, in a note on Thursday.

He warned that HDFC shares may see "significant selling pressure," advising investors to avoid "bottom‑fishing" until governance concerns are addressed.

HDFC Bank and RBI, did not immediately respond to emails seeking comment.

As of Wednesday, HDFC Bank's market cap stood at 13.08 trillion rupees ($140 billion), higher than the 9.95 trillion‑rupee valuation of State Bank of India, the country's largest public-sector lender, according to LSEG data.