The stock dropped as much as 8.7% in early trade following Chakraborty’s exit, in which he cited differences over “values and ethics,” prompting investor unease about internal governance at India’s largest private sector bank.

India’s central bank said in a statement that HDFC Bank remained financially sound, describing it as a domestically systemically important institution with a professionally managed board and competent leadership.

Based on periodic supervisory assessments, the Reserve Bank of India said it had found no material concerns related to the bank’s conduct or governance, offering reassurance to markets amid the leadership change.

The RBI approved the appointment of Keki Mistry, a long-time HDFC Group executive, as interim non-executive chairman for a period of three months.

Speaking to reporters and analysts, Mistry said there had been no discussion of governance issues within the board and that he was unaware of the concerns cited in Chakraborty’s resignation letter. He added there were no indications of a power struggle within the bank.

Mistry suggested the resignation may have resulted from a relationship issue between Chakraborty and the management team that developed over time, and clarified that the exit was unrelated to the bank’s operational or financial performance.

HDFC Bank holds slightly more than a tenth of India’s total banking system deposits, making it a critical pillar of the country’s financial system. As a systemically important bank, it is required to maintain higher capital buffers due to its size and interconnectedness.

The sharp market reaction underscores investor sensitivity to leadership disruptions at major financial institutions, even as regulators and the bank sought to contain concerns about governance and stability.

The Reserve Bank of India said it has revised the limits under its ways and means advances facility. This facility allows states to manage short-term mismatches in receipts and expenditure.

Under the revised arrangement, the RBI has set the advances limit for the Delhi government at 8.9 billion rupees. This adjustment reflects the addition of Delhi’s banking operations to the central bank’s responsibilities.

As a result of this change, the combined advances limit for all states and union territories has increased. The overall ceiling now stands at 610.08 billion rupees, up from the earlier level of 601.18 billion rupees.

Officials said the revision is part of routine financial management measures. The aim is to ensure smooth cash flow for governments during periods of short-term liquidity pressure.

Ways and means advances are temporary loans provided by the RBI to state governments. They help bridge timing gaps between revenue inflows and expenditure commitments.

The central bank reviews these limits periodically based on operational requirements. Adjustments are made to reflect changes in responsibilities and financial needs.

The latest revision came after the RBI assumed banking functions for the Delhi government. This operational shift required recalibration of the existing framework.

By raising the overall limit, the RBI aims to maintain balance across all states and union territories. The increase ensures that aggregate liquidity support remains adequate.

Officials emphasized that the change does not alter the fundamental structure of fiscal coordination. It is intended to preserve stability and predictability in public finance management.

State governments rely on ways and means advances to manage day-to-day cash positions. These facilities are typically repaid within a short period.

The RBI said the revised limits will be effective immediately. States and union territories can access the updated facility as needed.

Financial experts noted that such adjustments are common in response to operational changes. They are seen as technical measures rather than policy shifts.

The central bank continues to monitor liquidity conditions closely. It aims to support orderly financial operations across all levels of government.

The increase in the aggregate limit is relatively modest. However, it ensures continuity after the inclusion of Delhi’s accounts.

Market participants said the announcement is unlikely to have any immediate market impact. The measure primarily affects inter-governmental financial arrangements.

The RBI has reiterated its commitment to efficient public finance operations. It continues to coordinate with state governments on cash management practices.

The central bank regularly communicates such changes through official notifications. This ensures transparency and clarity for all stakeholders.

In recent years, the RBI has focused on strengthening institutional frameworks. This includes refining mechanisms that support government banking operations.

The revised advances limit reflects the evolving administrative landscape. It aligns with the RBI’s mandate to manage government accounts effectively.

Officials indicated that further adjustments may be made if required. Such decisions will depend on future operational developments.

Overall, the move underscores the RBI’s role in supporting fiscal stability. It highlights the importance of flexible liquidity arrangements for governments.

The updated limits ensure that states and union territories have continued access to short-term funding. This helps maintain uninterrupted public services and expenditure flows.