HDFC Bank Delays CEO Reappointment Decision as Board Conducts Fresh Review

HDFC Bank is waiting for the outcome of an additional review by its independent directors before deciding whether to recommend the reappointment of Managing Director and Chief Executive Officer Sashidhar Jagdishan to the Reserve Bank of India (RBI), according to a Reuters report citing three sources familiar with the matter.

Jagdishan's current term ends in October, and the bank's board is yet to approve its recommendation.

Under RBI regulations, a bank's board is required to seek approval for a CEO's reappointment or propose fresh candidates around six months before the incumbent's term expires.

Independent Directors Conducting Additional Review

Reuters reported that the delay stems from a fresh review being carried out by HDFC Bank's independent directors.

According to the sources, the review is examining media reports published in May that alleged the bank had offered preferential interest rates on certain large deposits, a practice not permitted under RBI regulations.

At the time, HDFC Bank said it had robust internal oversight, audit and control mechanisms in place to ensure regulatory compliance.

The report cited sources as saying that the board committee will take a final decision on Jagdishan's reappointment after the independent directors submit their findings, which are expected in early August.

Two of the three sources said the review has not uncovered any evidence of wrongdoing so far.

Governance Concerns Triggered Investor Scrutiny

The bank has remained under investor focus since the sudden resignation of former Chairman Atanu Chakraborty in March. Chakraborty had stated that certain practices at the bank were inconsistent with his personal ethical standards.

An external legal review completed last month, however, found no evidence to substantiate the governance concerns raised by the former chairman.

In March, the RBI also issued a rare public statement, saying its periodic supervisory assessments had found no material concerns regarding HDFC Bank's conduct or governance.

Leadership Uncertainty Weighs on Stock

During the bank's post-earnings conference call on Saturday, the management described the CEO succession process as a "work in progress."

The uncertainty surrounding the leadership transition has weighed on investor sentiment. Since Chakraborty's resignation on March 18, HDFC Bank's shares have fallen 7.4%, underperforming the Nifty Bank Index, which has gained 4.6% over the same period.

Brokerage firm Nuvama Institutional Equities said the resolution of the bank's top management uncertainty remains a key trigger for any potential re-rating of the stock, Reuters reported.