Are India’s Independent Directors Really Independent?

A wake-up call from SEBI’s Chairman is forcing India’s boardrooms to look past paperwork and ask a harder question.

For years, Indian companies have measured good governance in a fairly simple way.

• Count the number of independent directors on the board.
• Check whether committees are properly constituted.
• Confirm that disclosures are filed on time.

This checklist approach has worked reasonably well. But a string of recent events suggests it may no longer be enough. “True board independence is measured not by its appearance on paper, but by its presence in the room.”

The Spark: A Resignation That Shook the Market

The debate resurfaced after Atanu Chakraborty stepped down as part-time chairman and independent director of HDFC Bank. His resignation letter was dated 17 March 2026 and was received by the bank the next day, 18 March 2026.

In the letter, Chakraborty pointed to certain practices at the bank over the previous two years that did not sit well with his personal values and ethics. He added that there was no other reason for his decision.

A few things stand out about this episode:

• No fraud was alleged.
• No specific regulatory lapse was identified : HDFC Bank’s interim chairman, Keki Mistry, later said the board had not seen any major disagreement, and that the exit was a personal decision rather than one tied to operations or governance.
• The market still reacted sharply: HDFC Bank’s American depositary receipts fell roughly 8%, and its market value dropped by more than ₹61,000 crore within the week. Its domestic shares fell over 4% on the BSE the day after the news broke.

The Reserve Bank of India moved quickly to approve Keki Mistry as interim part-time chairman for three months, to provide continuity while the board absorbed the shock .

The lesson here is simple: when companies disclose too little, the market fills in the blanks with speculation  even when the underlying institution is fundamentally sound.

SEBI Chairman’s Core Message

Speaking at the 19th CII Corporate Governance Summit in Mumbai on 6 April 2026, SEBI Chairman Tuhin Kanta Pandey used this moment to make a broader point.

His argument, in short: ticking the boxes on paper does not guarantee real oversight.

Pandey put it this way: the conversation needs to move past who occupies a board seat, and focus instead on how well that person actually contributes once seated. He also observed that boards today are generally well constituted, but not always equally effective  a gap he described as being between regulatory design and real-world practice.

A board can satisfy every technical requirement  director eligibility, tenure limits, committee structure under the Companies Act and SEBI’s listing rules  and still fail at the one thing independent directors are meant to do: ask hard questions and push back on management when needed.

Structure vs. Substance: The Real Divide

	Structural Independence (what regulators currently measure)	Substantive Independence (what actually protects shareholders)
Focus	Who sits on the board	How that person behaves once seated
Measured by	Tenure limits, eligibility criteria, committee composition	Willingness to challenge management, quality of debate, documented dissent
Governed by	Companies Act, 2013 (Section 149), SEBI LODR	Boardroom culture, information access, individual courage
Risk if missing	Technical non-compliance	Governance failure that looks compliant from the outside

This table captures the shift in thinking that Pandey is pushing for. The old model asked, “Is the box ticked?” The new model asks, “Is anyone actually watching?”

Why This Is a Genuinely Hard Job

Independent directors sit in an uncomfortable position by design.

• Oversee management, without getting pulled into day-to-day operations.
• Protect minority shareholders, who have no direct view into what happens in the boardroom.
• Challenge management’s assumptions, while depending almost entirely on the information management chooses to share with them.

In other words, the people responsible for oversight often have the least independent access to information. That structural tension is at the heart of the problem.

SEBI’s Proposed Fix: Build Capacity, Not Just More Rules

Interestingly, Pandey did not call for tighter regulation. Instead, he framed capacity building of independent directors as the next real frontier of governance reform in India.

Modern boards are now expected to understand subjects that didn’t exist in a governance conversation a decade ago:

• Cybersecurity risk
• Data governance
• Technology-led business models
• Fast-changing regulatory expectations across sectors

No single director can be an expert in all of these. So Pandey’s suggested response includes:

• Domain-specific orientation programmes, tailored to each company’s actual business and risk profile
• Structured peer-learning platforms, where directors can discuss real boardroom problems without breaching confidentiality
• Shared repositories of anonymised case studies and evolving best practices

The idea is to make directors better equipped to challenge management  not just legally qualified to sit in the room.

Not the First Warning

This isn’t the first time Pandey has raised this concern.

About a year earlier, SEBI had issued an interim order (dated 15 April 2025) against Gensol Engineering’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, accusing them of diverting company funds meant for electric-vehicle procurement, and barring them from holding any director or key managerial role. Three of the company’s independent directors resigned in the days that followed.

Commenting on the episode, Pandey made a similar point to the one he later repeated in Mumbai: the real test of an independent director is integrity, not procedural box-ticking. He described the guardrails — board oversight, statutory audit, shareholder approval for material transactions  as already being in place, and argued that episodes like Gensol reflected individual greed and misconduct rather than a systemic gap needing a full regulatory overhaul.

His consistent view is that India’s governance framework is largely sound on paper.

What often breaks down isn’t the rulebook. It’s whether people inside that rulebook are willing to:

• Ask uncomfortable questions
• Document dissent clearly
• Resist pressure to simply defer to management or promoters

What This Means in Practice

For company secretaries, legal teams, and directors themselves, this shift in regulatory tone has real consequences.

Future governance reviews  whether from SEBI, proxy advisory firms, or institutional investors — are likely to look more closely at:

• The quality of boardroom debate, not just its existence
• Whether dissent is actually documented, not just permitted
• Whether board evaluations are genuine assessments of engagement, or just an annual formality

Board evaluation, in particular, may need to evolve from a compliance checkbox into something closer to a real performance review.

The Disclosure Lesson

The HDFC Bank episode also carries a separate, practical lesson: how you communicate a resignation matters as much as the resignation itself.

Clear, structured disclosure at the moment a director departs isn’t just good practice anymore  it’s a matter of market stability.

Ambiguity itself is a governance risk. It can move share prices and unsettle depositors, even when there’s no wrongdoing at all. Companies should treat exit disclosures with the same seriousness they apply to related-party transactions or other material events, not as routine boilerplate.

The Bottom Line

Are India’s independent directors independent? In the strict legal sense, yes  almost always.

But independence in the way Pandey is now describing  independence of judgment, of engagement, and of the courage to dissent  is a much higher bar.

It won’t be met through a single circular or amendment. It will be tested one boardroom at a time.

SEBI’s renewed focus on capacity building signals where India’s governance reform is heading next: less about who gets a seat at the table, and more about what they’re willing to say once they’re sitting in it.