‘Independent director’: Has it run its course?

Abstract

On March 23, 2026, Sebi released a statement in the wake of the sudden resignation by one of the independent directors of the HDFC Bank that the ‘Independent directors need to act responsibly, and back up any insinuations with evidence.’ The fierce consequence of such resignation was steep loss borne by investors when, after the resignation, HDFC Bank’s shares reported to drop as much as 8.7%, which was the steepest fall in more than two years. Similarly, the US-listed American Depository Receipts fell by more than 7% overnight, wiping out more than Rs 1 lakh crore of investors wealth within hours and raising questions about governance at India’s largest private lender. This naturally leads us to question the faith and trust placed in the mechanism of independent directors on the board of companies, which was introduced to ensure improved corporate governance, both by the legislature and the regulator.