With external law firms not finding any merit in the concerns raised by former chairman Atanu Chakraborty in his resignation letter, the HDFC Bank board is expected to initiate the process of reappointing Sashidhar Jagdishan for a third term as managing director and chief executive officer.
The lender was awaiting the law firms’ findings before formally launching the reappointment process and selecting a new non-executive chairman.
Jagdishan’s current term ends in October. HDFC Bank this month received RBI approval to extend the tenure of interim chairman Keki Mistry by three months until September 18.
ET recently reported that former RBI Deputy Governor Rajeshwar Rao is among the five candidates shortlisted for the post of Chairman by the bank’s Nominations and Remuneration Committee. The board will forward three candidates to the RBI for approval.
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In a stock exchange filing on June 26, the bank said former chairman Chakraborty’s statement and its implications were not supported by records and witness interviews in a due diligence review conducted by two law firms. The evidence examined at the same time did not correspond to his statement, and the review did not reveal any basis for this statement, the report said.
“The integrity of the law firms’ relationship with the board improves 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 the correct procedures were followed and it would be unfair to single out the CEO on such matters.” Jagdishan has said in recent months that he is “ready” to be reappointed if the council decides to do so. However, board approval alone will not be enough. The RBI’s approval is a critical hurdle and some analysts believe the regulator may weigh a broader set of considerations before nominating a third term candidate.
โWhile the HDFC Bank board wants another term for Jagdishan, the ball is now in the regulator’s court as it assesses the events of the past year,โ said Asutosh Misra, head of research at Ashika Group. โHowever, HDFC Bank has a strong leadership team; Kaizad Bharucha is also a very capable leader.โ
A number of factors may preclude direct re-prescribing. The bank’s loan-to-deposit ratio remains elevated, a legacy of its 2023 merger with HDFC Ltd, which created a large mortgage portfolio financed by borrowing rather than deposits, leaving the bank with a structurally higher loan-to-deposit ratio than its peers. Normalizing this ratio was one of the central objectives of Jagdishan’s second term and remains a work in progress.