With external law firms finding no merit in the concerns raised by former chairman Atanu Chakraborty in his resignation letter, HDFC Bank’s board is expected to initiate the process to reappoint Sashidhar Jagdishan for a third term as managing director and chief executive.
The lender had been awaiting the law firms’ findings before formally initiating the reappointment process and selecting a new non-executive chairman of the board.
Jagdishan’s current term ends in October. HDFC Bank this month received RBI’s approval to extend the tenure of interim part-time chairman Keki Mistry by three months to September 18.
ET recently reported that former RBI deputy governor Rajeshwar Rao is among five candidates shortlisted for the chairman’s post by the nomination and remuneration committee of the bank. The board will refer three candidates to the RBI for approval.
In a stock exchange filing on June 26, the bank said former chairman Chakraborty’s statement and its implications were not substantiated by the record and witness interviews during the legal review conducted by the two law firms. The contemporaneous evidence reviewed was inconsistent with his statement and the review did not identify any basis for the statement, it said.
“The law firms’ clean chit to the board bolsters Jagdishan’s chances of being reappointed for another three-year term by both the board and the RBI,” said Suresh Ganapathy, head of financial services research at Macquarie Capital. “The fact that the law firms found no evidence on the issues raised by the former chairman indicates that right processes were followed, and it would be unfair to single out the CEO in such matters.”
Jagdishan has said in recent months that he is “willing” to be reappointed if the board so decides. However, the board’s endorsement alone will not be sufficient. RBI approval is the critical hurdle, and some analysts believe the regulator may weigh a broader set of considerations before clearing a third term.
“While the HDFC Bank board wants another term for Jagdishan, the ball now lies in the regulator’s court on how it views the events of the past year,” said Asutosh Misra, head of research at the Ashika Group. “That said, HDFC Bank has a strong leadership bench; Kaizad Bharucha is also a very capable leader.”
Anumber of factors could weigh against a straightforward reappointment. The bank’s loan-to-deposit ratio has remained elevated — a legacy of the merger with HDFC Ltd in 2023 which brought in a large mortgage book funded by borrowings rather than deposits, leaving the bank with a structurally higher credit-deposit ratio than peers. Normalising this ratio has been one of the central challenges of Jagdishan’s second term and remains a work in progress.
