Jagdishan’s current tenure comes to a close on October 26.

The bank is expected to announce its new boss by the end of the month.

Sources said that the search committee is keen to rope in an outsider to lead the bank.    

Class Action Suit

A senior executive of the bank said that Jagdishan's decision not to seek an extension was driven by a class action suit filed in the US and the possible fallout, which may have material implications for the operations of the bank.

This would have also put Jagdishan in a tighter spot.

The lawsuit, alleging serious discrepancies and violations by the bank, also named a few top executives, including Jagdishan and Chief Financial Officer Srinivasan Vaidyanathan. The class action lawsuit is still pending.  

“In case of an adverse ruling in the class action suit, the bank, along with Jagdishan, would further have had to pay a heavy penalty. Pressure built up on him due to the ongoing case, and this made things difficult for him to seek an extension,” an insider told The Secretariat.

Such extensions also require the nod of the Reserve Bank of India (RBI).

The RBI’s "Fit and Proper" criteria for the top bank executives are mandatory for screening integrity apart from other qualifications.

Controversy Around HDFC Bank

Allegedly, the bank breached corporate governance and regulatory norms by directing ₹45 crore (about US$4.7 million) to the Maharashtra State Road Development Corporation (“MSRDC”) with assured higher returns. The Reserve Bank of India (RBI) regulations restrict lenders from negotiating interest rate payouts; the additional payouts, allegedly, were camouflaged as marketing spends. 

On March 18, Atanu Chakraborty, the bank's then part-time Chairman, abruptly decided to quit. In his resignation letter, he cited that certain practices in the bank were not in “congruence” with his “personal values and ethics.”

HDFC’s AGM

Barely a month ago at the bank’s annual general meeting, Rajiv Kumar, part-time Chairman, said that there were no governance-related concerns at the systemic level.

“Let me reiterate, on my behalf and on behalf of the board, that the bank is fundamentally strong, with a pristine balance sheet,” he had said. The bank nimbly closed a matter related to an internal probe to review discrepancies related to the ₹45 crore Maharashtra State Road Development Corporation (MSRDC) deposits and transactions case, saying those were due to "business overreach."

The report noted that there was no mala fide intent.

With the closure of the case, there was a built-up expectation that the extension of Jagdishan’s term was a given.

“At that point, within the bank, most people thought that the CEO’s term would be extended and the messaging was done accordingly. But things went south after that, with a rise in discontent among several sections, including outside stakeholders, which prompted even the Chairman to take a firm stand,” an insider told The Secretariat.

Kumar, who joined the bank in July following Chakraborty’s resignation, is leading the search for Jagdishan’s replacement.

Steep Fall In Price

Exactly a year ago, HDFC Bank shares were trading at around ₹960 a piece. At present, the stock is trading at about ₹710–715, reflecting a steep fall in the price. The bank’s market capitalisation on September 7 stood at about ₹5.45 trillion.

“Leadership challenges will have to be addressed, and the trust deficit that has been created at this juncture needs to be plugged. The next CEO will have to thrash out ways to do so,” the person said.

In July 2023, HDFC Ltd merged with HDFC Bank.