HDFC Bank's board will consider chief executive officer (CEO) Sashidhar Jagdishan's reappointment only after it receives the findings of a legal review into concerns raised by former chairman Atanu Chakraborty in his resignation letter, according to two people aware of the matter. With barely four months left in Jagdishan's current term, the delay has extended uncertainty over leadership at India's largest private-sector lender.
The board's three-member nomination and renumeration committee, headed by Harsh Kumar Bhanwala, the former chairman of the National Bank for Agriculture and Rural Development (Nabard), will meet only after the consolidated report's submission, which has been delayed beyond the original internal timelines, said the people. While no specific deadline was announced, the report was to be submitted “within a reasonable period of time".
In March, the bank had appointed law firms Trilegal and Wadia Ghandy & Co to check the minutes of the board meetings and see if there were any discrepancies that Chakraborty had pointed out, but did not elaborate upon. The people cited above said a US-based law firm was also appointed by the board and the report has been delayed as the global firm is yet to finalize its findings.
“It is now expected only by mid- or end-June,” said one of the people cited earlier.
For Jagdishan, 61, who joined the bank in February 1996, this means more uncertainty about his reappointment, as his current term ends in October.
Bank boards typically approve CEO reappointments and seek approval from the Reserve Bank of India (RBI) about six months in advance. For instance, in January, rival lender ICICI Bank’s board had approved the reappointment of Sandeep Bakhshi as the chief executive by another two years. Bakshi’s term also ends in October. HDFC Bank board had approved Jagdishan’s current term in March 2023, a good seven months before the deadline.
Both people cited above said they do not expect anything detrimental against Jagdishan in the report.
Experts said the six-month timeline for approval can be used flexibly. One of the people said the NRC (Nomination and Remuneration Committee) of the board will decide on a Plan B, if necessary. “Sending CEO reappointment requests to the RBI (Reserve Bank of India) for approval six months in advance is a norm, not a policy,” said Abizer Diwanji, founder of strategic advisory provider Neostrat Advisors.
Diwanji said RBI can also fasttrack approvals if the situation demands.
“The bigger issue will be if RBI approves the reappointment request, but gives only a year’s extension. However, I don’t think HDFC Bank needs to look at a plan B right now,” he said. From the point of view of the regulator, said Diwanji, as long as there is transparency in governance and it is aware of what is happening at a bank, it does not impact appointments.
Emails sent to HDFC Bank, Trilegal, and Wadia Ghandy & Co remained unanswered until press time.
Three months ago, the bank lurched into a crisis after the then chairman Chakraborty suddenly resigned, with his 17 March letter to the board citing “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics. In an interview to CNBC-TV18 on 30 March, Chakraborty hinted that the “mis-selling” of Credit Suisse’s perpetual bonds was a bone of contention between him and the bank's management.
The bank has reiterated that Chakraborty “did not mention any happenings and practices which were not in congruence with his personal values and ethics”.
Amid the unfolding of this development, the central bank has stood firmly behind HDFC Bank. In a statement after Chakraborty’s resignation, RBI had said, “there are no material concerns on record as regards its conduct or governance”. Deputy governor Swaminathan J. said in April that any individual supervisory concerns, as and when it arises, are dealt with on an ongoing specific basis.
Then, a report by The Indian Express at the end of May said HDFC Bank had made payments of ₹45 crore to the Maharashtra State Road Development Corporation (MSRDC) that were routed as marketing expenses to effectively offer higher returns on deposits. The bank said it strongly rejects any assumptions of wrongdoing or culpability based on selective material.
Later, at a post-policy press conference on 5 June, when asked about interest payout differentials, RBI governor Sanjay Malhotra said competition among banks while mobilizing deposits is “good” as long as it is transparent. In a draft circular issued late Friday, RBI proposed allowing banks greater flexibility in pricing their bulk deposits, while ensuring uniformity in disclosure of interest rates on deposits. The proposed amendments look to clarify RBI’s stance on differential pricing of deposit rates by banks.