HDFC Bank’s Big Succession Test: Who Will Take Over From Jagdishan?

HDFC Bank is likely to nominate Deputy Managing Director Kaizad Bharucha as one of the two candidates for the lender’s next chief executive, as it prepares for the retirement of incumbent MD and CEO Sashidhar Jagdishan at the end of his second term in October, according to two people familiar with the matter cited by Reuters.

The country’s largest private sector lender is also considering an external candidate, as RBI rules require banks to submit multiple names for the top position. The final appointment is subject to approval from the central bank.

HDFC Bank announced Jagdishan’s decision to step down on Saturday, saying he would not seek reappointment after his current term ends. The bank said it would accelerate the succession process.

Jagdishan has served as HDFC Bank’s CEO since October 2020. His departure comes after a turbulent period for the lender, marked by a change at the top of its board, questions around governance and scrutiny over the pricing of large institutional deposits.

Bharucha emerges as key internal candidate

Bharucha, currently HDFC Bank’s Deputy Managing Director, is considered the leading internal contender for the top job, according to the people cited by Reuters.

He oversees the bank’s retail and wholesale businesses and is not scheduled to retire until 2029. Under RBI rules, a whole-time director can serve for a maximum of 15 years, although exemptions can be sought.

Bharucha would have completed 15 years as a full-time director by 2029, making him eligible for consideration as CEO under the applicable rules.

Neither HDFC Bank nor Bharucha responded to Reuters’ requests for comment sent outside regular business hours.

The bank is also evaluating candidates from outside the organisation, with the requirement to submit more than one name to the RBI shaping the selection process.

CEO search follows months of governance concerns

The succession process comes roughly six months after a major leadership disruption at HDFC Bank.

In March, chairman Atanu Chakraborty resigned unexpectedly, saying certain practices at the bank were inconsistent with his “personal values and ethics”. His departure came at a time when Jagdishan had been widely expected to continue as CEO.

The chairman’s comments triggered concerns among investors about the bank’s governance practices. An external legal review subsequently found no evidence to substantiate the governance concerns raised by Chakraborty.

However, the episode was followed by another governance-related development. Last month, HDFC Bank’s board penalised Jagdishan and three other executives in connection with a separate matter involving the pricing of large deposits.

The developments have kept the bank’s governance and leadership structure under investor scrutiny as it prepares for a change at the CEO level.

HDFC Bank shares down 27% this year

The leadership uncertainty has also coincided with a sharp decline in HDFC Bank’s stock.

The bank's shares have fallen 27% so far this year, with the decline accelerating following Chakraborty’s resignation. Foreign investors held around 40% of HDFC Bank at the end of June, making their sentiment an important factor for the stock.

Investors have also questioned whether HDFC Bank has fully realised the expected benefits of its 2023 merger with HDFC Ltd, which was overseen by Jagdishan.

The upcoming CEO transition therefore comes at a critical juncture for the lender.

While Bharucha represents continuity from within the organisation, the consideration of an external candidate could signal a broader search for a fresh leadership approach as HDFC Bank seeks to address investor concerns and restore confidence.