For HDFC Bank, India’s largest private lender by assets, the need to consistently fire-fight issues in recent years -- from a regulatory ban on issuance of new credit cards; need for an upgrade in technology platforms; the exits of senior management staff to the sudden exit of part-time chairman Atanu Chakraborty – might all be too familiar.

These events have happened in the past five years after Sashidhar Jagdishan, JDFC Bank’s managing director and CEO, took charge from his predecessor and veteran banker Aditya Puri on October 27, 2020. Puri had built HDFC into a fortress of a bank and is still India’s largest bank with a market capitalisation of ₹11.45 lakh crore.

In coming months when the board of the Bank will meet to discuss an extension to Jagdishan’s term, which ends October 26, 2026, they might want to deliberate a little more on the matter. The Bank’s current part-time chairman Keki Mistry and the Board on March 19, a day after Chakraborty’s exit, expressed their support for a next term for Jagdishan.

The Bank’s deputy managing director Kaizad Bharucha was conspicuous by his absence at this March 19 meeting, but Jagdishan said it was a scheduled “routine health check-up.”

Governance is the newest problem for Jagdishan to deal with, but there are larger issues on hand. The mega-merger of HDFC with the parent Bank, effective July 2023, continues to hurt the Bank. HDFC Bank has an elevated loan-to-deposit (LDR) ratio which is near 100% levels. A high LDR means that a bank has let out most of its deposits, which can signal liquidity risks.

“The Bank has taken the pain of the merger upfront. But these types of mergers take years to turn productive, possibly 3 to 4 years, if not more,” a banking analyst told Fortune India, declining to be named. In the current market scenario, valuations are being driven by higher growth multiples.

Sustenance vs re-building

Analysts said private lender ICICI Bank, HDFC Bank’s nearest rival, continues to command a premium of 10-15% over HDFC Bank. Some analysts are giving a 1.8x FY28 earnings for ICICI Bank, with HDFC Bank at 1.5x. A second banking analyst told Fortune India: “ICICI Bank is a story of sustenance and HDFC Bank is a story of re-building. Sustenance is easier [to manage] than re-building,”

ICICI Bank commands this valuation premium because it has consistently improved on its asset quality, shifted its focus towards retail and SME lending; while reducing its exposure to domestic wholesale corporate lending – which had turned bad -- from levels in the previous decade. It has also consistently enhanced its digital banking platform in the past five years.

But post Chakraborty’s exit, Jefferies is one of the few foreign institutional brokerages which has given a ‘buy’ rating to HDFC Bank, with valuations of 1.6xFY27 earnings. Jefferies analysts Prakhar Sharma and Vinayak Agarwal say: “[Post correction] the valuations are attractive given stronger asset quality, healthy growth and return on earnings. Clarity on board-issues and rollover of CEO-term/chairman appointment can aid re-rating.”

Even while the HDFC Bank board has been actively trying to manage the post Chakraborty’s exit crisis, a deeper concern remains in the backdrop of the ongoing investigation by independent legal firms.

“The Bank’s board will have to hold someone accountable. If the reports indicate that governance is proven weak, the FII pressure on the Bank stock will be high and we could see more correction,” a ratings agency analyst said on condition of anonymity.

Investors are not yet fully convinced of how the future will pan out for HDFC Bank, with the stock down 25.84% at ₹735 at the BSE in 2026, compared to a much smaller 9.43% decline at ₹1,211.8 for ICICI Bank in the same period. Take a five-year timeframe of stock returns and ICICI Bank outstrips HDFC sharply, with a 103% growth compared to a 1.1% decline for HDFC Bank.

Can HDFC Bank improve its LDR?

The merger of HDFC with the parent HDFC Bank saw a massive loan book coming into the portfolio, but fewer deposits. HDFC Bank’s chief financial officer Srinivasan Vaidyanathan has spoken about reducing the Bank's LDR to a 90% to 96% range in FY26 and 85%–90% by FY27. While HDFC’s LDR is at near 100%, ICICI Bank’s LDR is at a healthier 87%, according to Jefferies data.

But analysts say for HDFC Bank to get to this position, deposits have to grow 18-19% on their balance sheet size and gain incremental 21% market share in the industry.

“For HDFC to perform better on an incremental basis, deposit growth in the ecosystem has to be there. A bank can bring the LDR down by increasing its deposit rate faster than loan book or slowing down their loan book,” the second analyst added.

But in recent years, boosting deposit growth has been a challenge for most banks. Data shows that credit growth has consistently outpaced deposit growth. According to RBI data, credit growth for commercial banks stood at 14.5% (y-o-y) as on February 28, 2026, while deposit growth was lower at 11.9% as on the same date.

In all likelihood, HDFC Bank will need to calibrate its loan book growth in coming months, analysts said.

The biggest challenge for Jagdishan will be to deal with the deposit-loan growth issue and focus on improving operating efficiency, considering there is no mis-governance to its financial data and asset quality and profitability is sound. On the other hand, ICICI Bank does not need to alter anything. It has found success by keeping things simple. Its leadership is also intact, with CEO Sandeep Bakhshi’s term set to end on October 3, 2028.

The coming quarters and possibly even a year is a tough road ahead for HDFC Bank, with the assumption that there will be no new negative surprises. The question which arises then is: do investors have enough patience here?