Chairman Exit, CEO Departure, US Lawsuit: What’s Going On At HDFC Bank?

HDFC Bank is heading for a change at the top. Sashidhar Jagdishan, who has led the bank through one of the most consequential phases in its history, will step down as Managing Director and CEO when his current term ends on October 26, 2026, after deciding not to seek another term.

The announcement comes at a particularly sensitive time for the lender, which has faced a series of governance, compliance and leadership-related controversies over the past year.

Jagdishan’s exit adds another layer of uncertainty for a bank that has already been dealing with questions over management oversight and internal controls.

He took charge as CEO in October 2020 and subsequently oversaw the landmark merger of HDFC Bank with mortgage lender Housing Development Finance Corporation (HDFC Ltd), creating one of India’s largest financial institutions.

The timing of his departure is significant. It follows months of scrutiny triggered by the abrupt resignation of former chairman Atanu Chakraborty and an internal investigation into the bank’s handling of institutional deposits.

Although an independent legal review did not find systemic wrongdoing, the succession announcement comes against a backdrop of heightened investor sensitivity to governance at the lender.

Here is a timeline of the key developments.

November 2025: RBI Penalises HDFC Bank For Compliance Lapses

The governance concerns predate the leadership upheaval. In November 2025, the Reserve Bank of India imposed a ₹91 lakh penalty on HDFC Bank after identifying several regulatory and operational deficiencies.

The RBI flagged, among other things, the use of multiple benchmarks within the same loan category, shortcomings in KYC compliance and deficiencies in the bank’s oversight of outsourced financial services.

While the penalty was modest relative to HDFC Bank’s size, the action highlighted weaknesses in compliance processes at the lender.

March 2026: Chairman Atanu Chakraborty Abruptly Resigns

The most significant governance shock came on March 18, when Atanu Chakraborty resigned as HDFC Bank’s part-time non-executive chairman.

Chakraborty’s resignation letter drew particular attention because he said that “certain happenings and practices within the bank” were not in line with his “personal values and ethics”.

The unusually worded departure sparked speculation about possible disagreements within the bank and sent HDFC Bank shares sharply lower. The bank’s market capitalisation took a significant hit over the following trading sessions as investors sought clarity on what had prompted the chairman to leave.

An independent legal review completed in June subsequently concluded that there was no systemic wrongdoing. However, the circumstances surrounding the resignation continued to cast a shadow over the bank’s governance framework.

August 2026: MSRDC Deposit Practices Come Under The Spotlight

The next major controversy involved HDFC Bank’s relationship with the Maharashtra State Road Development Corporation (MSRDC).

An internal vigilance investigation examined payments estimated at ₹35-45 crore that were allegedly used to provide the equivalent of higher interest on institutional deposits. The payments were recorded as marketing expenses and road-safety awareness contributions rather than as interest.

The arrangement raised concerns because it could effectively allow the bank to offer depositors returns above the stated interest rate while classifying the additional amount differently.

The bank’s board subsequently characterised the episode as “business overreach”. In July, it imposed a ₹1 lakh penalty and issued warning letters to senior executives, including Jagdishan, CFO Srinivasan Vaidyanathan and Retail Assets Head Arvind Vohra.

The RBI subsequently sought an explanation from the bank over the decision to impose a public monetary penalty on senior management. The episode also led to a US class-action lawsuit alleging that the bank had made false or misleading statements about its accounting and disclosures between 2023 and 2026.

The lawsuit alleges that between 2023 and 2025, HDFC Bank offered MSRDC an inflated interest rate of 6.01% on its deposits—well above the standard standard rate.

To bypass regulatory ceilings set by the Reserve Bank of India (RBI), the extra 2.51% interest payout (totaling roughly ₹45 crore) was allegedly routed through third-party vendors.

August 2026: Dubai Investment Dispute Adds To Scrutiny

HDFC Bank’s overseas operations have also faced renewed scrutiny. More than 75 high-net-worth investors in Dubai have alleged that products linked to Carisel Asset Management were mis-sold through the bank’s Dubai operations between 2017 and 2019.

The investors claim that high-risk, leveraged life-settlement products were presented as offering capital protection and returns of around 14-16%.

They allege that they subsequently faced difficulties in redeeming their investments and suffered losses of around $13.5 million in principal.

HDFC Bank has maintained that it merely facilitated the transactions and was not the product provider. Nevertheless, the dispute has added to the regulatory and reputational pressure around its international operations. The Dubai Financial Services Authority had previously restricted the bank’s DIFC branch from onboarding new clients.

August 29, 2026: Jagdishan decides not to seek another term

Against this backdrop, HDFC Bank announced on August 29 that Jagdishan would leave the bank when his current term expires on October 26.

The bank said Jagdishan had decided not to seek reappointment. His departure brings to an end a six-year tenure during which HDFC Bank underwent a historic transformation following its merger with HDFC Ltd.

For investors, the immediate question is who will take over and whether the transition can be managed without adding to the bank’s existing governance overhang.

Why The Sequence Matters

The individual episodes differ significantly in nature and severity. The RBI’s compliance action involved operational deficiencies, the independent legal review did not find systemic wrongdoing, and HDFC Bank has disputed allegations concerning the Dubai investment products.

Yet the frequency and proximity of these developments have made governance a recurring theme around the bank.

The chairman’s abrupt exit, scrutiny over institutional deposit practices, regulatory compliance findings, international legal disputes and now the impending departure of the CEO have together created an unusual period of leadership and governance uncertainty for HDFC Bank.

The next CEO will therefore inherit not just a large post-merger balance sheet, but also the task of restoring investor confidence in the bank’s governance, controls and succession framework.