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HDFC Bank delays CEO reappointment recommendation amid fresh board review
Independent directors conduct additional probe as Jagdishan’s October term nears end
MUMBAI: It’s a case of hitting the pause button at India’s largest private lender. HDFC Bank is yet to recommend the reappointment of managing director and chief executive officer Sashidhar Jagdishan to the Reserve Bank of India, as the bank’s independent directors carry out an additional review, according to a Reuters report citing people familiar with the matter.
The board has not yet approved its recommendation for Jagdishan, whose current term ends in October. Under RBI regulations, bank boards are expected to seek approval for a chief executive’s reappointment, or submit fresh names, six months before the incumbent’s tenure expires.
The delay comes months after the abrupt resignation of former chairman Atanu Chakraborty in mid-March. Chakraborty had said the bank’s practices were not aligned with his “personal ethics”, triggering heightened investor scrutiny over governance.
An external legal review completed last month reportedly found no evidence to substantiate the governance concerns raised by Chakraborty. In March, the RBI also issued a rare public statement saying its periodic assessments had found “no material concerns on record as regards its conduct or governance”.
According to Reuters, the latest review by independent directors is examining media reports published in May that alleged HDFC Bank had offered preferential interest rates on certain large deposits, a practice not permitted under RBI rules. Sources told the news agency that the review has, so far, not uncovered any wrongdoing.
Responding to those reports in May, HDFC Bank had said it maintains robust internal oversight, audit and control processes.
One source told Reuters that the board committee would decide on proposing Jagdishan’s reappointment after the independent directors submit their findings, while another said the exercise is expected to conclude in early August.
During the bank’s post-earnings conference call on Saturday, the management described the CEO succession process as “a work in progress”. The bank did not immediately respond to Reuters’ request for comment on the additional review.
The uncertainty surrounding the leadership transition has weighed on investor sentiment. HDFC Bank shares have declined 7.4 per cent since Chakraborty’s resignation on 18 March, underperforming the Nifty Bank index, which has gained 4.6 per cent over the same period.
Brokerage Nuvama Institutional Equities said management continuity remains the biggest overhang on the stock, adding that the bank’s re-rating depends on resolving the uncertainty around its top leadership.
With Jagdishan’s term set to end in October, investors will now be watching closely for the outcome of the board’s review and the bank’s eventual recommendation to the RBI, which is expected to provide greater clarity on HDFC Bank’s leadership roadmap.
