RBI asks HDFC Bank to put key appointments on hold

HDFC Bank, the country's largest private sector lender, on Wednesday said that the Reserve Bank of India (RBI) has put two of its key appointments on hold. In a notification to the exchanges, HDFC Bank said, “We are now in receipt of a communication dated April 7, 2020, from the RBI stating that since these are important positions, the bank is advised to examine and submit the proposal after a new managing director (MD) and chief executive officer (CEO) assumes charge later this year. The bank shall accordingly ensure compliance with RBI’s instruction as above.”

HDFC Bank had appointed Sashidhar Jagdishan as additional director and Bhavesh Zaveri as executive director on November 28. Jagdishan, formerly chief financial officer at the bank, had been appointed the ‘change agent’ in August 2019 and was widely considered as a possible candidate to succeed incumbent MD and CEO Aditya Puri. Zaveri led operations at HDFC Bank.

In January, the Mumbai-based private sector lender had told analysts, in a management call, that it expects to finalise “the right candidate” to succeed Puri by July 2020, and post this it will submit the candidate’s name to the RBI for approval.

“Currently, the bank has shortlisted candidates (including global and internal) and expects to finalise the right candidate by July 2020,” said banking analysts at Motilal Oswal in a report to investors. This will allow the management to ensure there is a seamless transition as Puri, who turns 70 next year, will retire in October.

In November, HDFC Bank had announced it had set up a six-member search committee to appoint a successor to the incumbent MD. Puri is the advisor to the panel that comprises Shyamala Gopinath, Sanjiv Sachar, M.D. Ranganath, Sandeep Parekh, Srikanth Nadhamuni, and Keki Mistry.

Puri has been leading the bank as MD since it was set up in 1994. According to the company’s FY19 annual report, Puri’s total remuneration was close to ₹13.7 crore annually.

Under Puri’s leadership, the bank has weathered the asset quality storm to have one of the most stable bad loan ratios. The lender’s strategy to focus on the retail loan book allowed the bank to scale profitability and gain market share. HDFC Bank is regarded by investors as one of the most valuable banks in terms of price-earnings ratio.