HDFC Bank: Challenge of selecting the next CEO and challenges for the next CEO

Market chatter is that HDFC Bank shares may react mildly positively to the weekend news that CEO Sashidhar Jagdishan will not seek reappointment, but retire on October 26, when his term ends. For the market, the positive from this news is that the prospect of the board or RBI agreeing to only a one-year extension for Jagdishan is avoided, as that would have meant prolonged uncertainty.

But the bank is by no means out of the woods: the first uncertainty is who will be the next MD and CEO; and thereafter, if the new CEO is able to stop the flow of leaks distracting the bank and weld it into a fighting unit yet again.

Let’s take the first question: ‘Who may be the next CEO?’ The likely internal candidate, Kaizad Bharucha, faces the prospect of getting only a 2.5-year term, because of an RBI rule that caps a board member’s term at 15 years. Bharucha has already served 12 and a half years on the board as a whole-time member. Also, the board has to give the name of at least one external candidate as well.

It’s tough to find professionals who can run such a large, aggressive and successful bank. One top fund manager said Mr Dinesh Khara, former SBI Chairman, may be approached. Mr Khara would be a great choice since he has run a much larger bank. At the age of 65, he has five clear years. But the DNA of a private sector bank like HDFC would be fundamentally different from SBI.

Large banks like SBI, ICICI and HDFC Bank prefer internal candidates because even successful professionals may take time to understand the DNA of the bank and win the trust of the top management.

Now let’s come to the bigger issue of challenges the new CEO may face. As outgoing CEO Jagdishan wrote to the board, the ALM (asset-liability mismatch) problems thrown up by the merger of HDFC are largely over. The bank may soon grow its loan book in step with the industry.

The bigger challenge is to free the bank from internal and external enemies. Many banking and market experts see Jagdishan as the unfortunate victim of groups in the bank who were leaking information and social media groups outside who were drumming up the negativity.

The marketing incentive given to MSRDC to make up for lower deposit rates, as well as the selling of AT-1 bonds, were issues that happened before Jagdishan became CEO. Yes, he was CFO then, but if the top man has to take the blame, then Jagdishan is not the only one at fault. Also, most bankers acknowledge that giving some incentives to grab a large deposit account is common practice in Indian banks.

Net-net, Jagdishan is more a victim of vicious leaks, and one of the challenges before the board and the next CEO is to identify such leaks and punish these elements or, at least, stop such behaviour.

But this apart, HDFC Bank’s plight is much better than ICICI’s was when Chanda Kochhar resigned. At that time, ICICI had higher NPAs and faced charges of wrongful lending. Yet a quiet, diligent Sandeep Bakshi has seen the bank through those dark days and made it among the best in the business today.

HDFC Bank, by comparison, has a strong balance sheet and P&L. The MSRDC and AT-1 bond sale are instances of aggressive selling, not personal corruption or poor-quality lending. These can be righted easily. But so much will depend not only on the quality of the next CEO but also on how the chairman and board back him.

Finally, a thought for the regulators, the government and India Inc, especially its financial sector: Large state-owned banks and even non-bank PSUs successfully hand over the baton from CEO to CEO. Why are private sector banks like HDFC and Kotak struggling? Does the fault lie with allowing one CEO too long a reign? That’s a debate for the regulator.

Secondly, are boards and CEOs not concentrating enough on grooming successors? Here, bank boards should probably take some lessons from Mr KV Kamath, who not only ensured quality successors to choose from when Chanda Kochhar left suddenly, but also trained enough next-gen leaders who went on to lead other banks and NBFCs like Axis, IDFC First Bank and Jio Financial.

Also Read: HDFC Bank CEO reappointment process to happen ‘well within time’: Sources | Exclusive

First Published: 

Aug 30, 2026 11:05 PM

IST