Coming months will be defining for HDFC Bank: Proxy advisory firm IiAS

The exit of the top leadership in any corporate is always transformational. In the case of HDFC Bank, India’s largest private sector lender, it will also be defining. This is because it has navigated much of the year only battling corporate governance challenges and trying to convince all stakeholders that the internal controls at the bank are in place. 

On August 29, HDFC Bank’s current managing director and CEO Sashidhar Jagdishan announced that he will not seek reappointment for a third successive term, after his second term ends on October 26, 2026. The board of the bank will now accelerate the process to find and recommend to the Reserve Bank of India (RBI) suitable names for a successor.  

Shareholders and investors are far from convinced that everything is right at the Bank. On August 5 at the HDFC Bank’s AGM the board faced a barrage of questions which related to expansion plans to boost income, corporate governance issues, succession plans for a new CEO, the financial drag on the bank after HDFC's merger with the Bank in July 2023 and how to improve margins and CASA. 

They also asked for AI initiatives, CSR details, sustainable projects and details of the findings of the law firms relating to the exit of former, part-time chairman Atanu Chakraborty in March this year. An independent, external legal review by two law firms, Wilson Sonsini Goodrich & Rosati and Wadia Ghandy & Co, found no evidence to support concerns which Chakraborty had raised earlier. 

Coming months defining for HDFC Bank 

“The coming months will be defining for HDFC Bank. Although it has long been viewed as one of India’s best-managed financial institutions, the events of 2026 have exposed weaknesses in its governance framework,” says Institutional Investor Advisory Services (IiAS) a Sebi-registered proxy advisory firm, providing independent research, data, and voting recommendations on corporate governance and shareholder resolutions for Indian companies. [Disclaimer: HDFC Bank is one of IiAS’ several shareholders.] 

“But governance is not judged by financial outcomes alone. For investors, the means are just as important as the ends, and processes matter as much as outcomes. They want to know not only whether specific issues have been resolved, but also what has fundamentally changed to reduce the likelihood of recurrence,” the IiAS report said. 

The markets have given a verdict which reflects the lack of confidence in the messages which have emerged from the HDFC Bank board. The HDFC Bank stock has fallen 28.49% in 2026 and 13.5% since the announcements of the Q1FY27 earnings, when the Bank’s net margins fell to a record low of 3.26%. 

The new leadership will need to walk the talk to not just rebuild cork ethics and culture but also rebuild the corporate governance premium which the bank has lost. 

HDFC Bank’s deputy managing director, Kaizad Bharucha, who has been with the bank for 26 years, appears to be the frontrunner. Bharucha, along with the recently appointed part-time, non-executive chairman and former finance secretary Rajiv Kumar and the CFO-designate Puneet Sharma, could give a new direction to the bank. 

If at all the RBI decides to opt for an ‘outsider’ to succeed Jagdishan, the names of Anup Bagchi, 55, MD & CEO of ICICI Prudential Life Insurance, K. Balasubramanian, CEO of Citi India, Rajiv Sabharwal, MD & CEO of Tata Capital and Vibha Padalkar, CEO of HDFC Life Insurance have been doing the rounds. 

The merger overhang 

One of the more difficult issues which Jagdishan took charge of was trying to plough the bank through the merger with HDFC. The benefits of the merger were well known. The bank will emerge more powerful in the mortgage lending and retail lending space. It also has become a behemoth, making it the second largest bank by asset size (approximately Rs 40 lakh crore), after State Bank of India (Rs 83 lakh crore). 

Rapid growth will obviously be a challenge for the bank now. It also means that the Bank’s credit to deposit ratio got skewed to a high, near 96%, and so did the CASA ratio which has fallen to 32% now compared to about 48% pre-merger with HDFC. 

“HDFC Bank has still not been able to deliver on what was expected when the merger took place. Investors are obviously concernment of the overhang,” said a CEO with a large equity research house, declining to be named. Obviously, the queries which they had at the AGM were valid, he added. 

Not many are doubting the long-term outlook being positive, underpinned by the combined entity's unparalleled scale, but the pressure on the bank to mobilise deposits is real and huge.  

Thus, besides rebuilding the investor confidence, there will be a bit of an overhang for the new successor, The advantage will be that the leadership would have learnt from all the mis-steps in recent times.