The surprise resignation of HDFC Bank Ltd.’s part-time chairman that wiped out $16 billion from the market capitalisation of India’s biggest private lender, has put its CEO in the spotlight amid rumbles of acrimony in top management and unease about its underperformance versus peers.
On 18 March, Atanu Chakraborty resigned from HDFC Bank, citing differences over “values and ethics”, triggering a stock selloff and a damage control exercise by the bank. While he did not elaborate on the differences he referred to, nine people, including board members and some current and former staff, told Reuters that the bank had been struggling with internal rifts in recent years, including between Chakraborty and CEO Sashidhar Jagdishan.
The two clashed over the bank’s strategy and its HR policy, said the people with knowledge of the matter. They declined to be named due to the sensitivity of the matter.
The HDFC Bank management and India’s banking regulator denied any governance or financial problems at the lender, but its stock fell 12% over three days after Chakraborty’s exit. It recovered briefly after the bank said last week it had appointed external law firms to review the claims, and has weakened again.
Investor concerns about HDFC Bank’s management come at a particularly inconvenient time for the lender: the Iran war is set to weigh on the Indian economy and dim the outlook for credit growth in the banking sector.
“Investors will eventually look at longer-term performance but if the quarterly results and stock prices underperform markets, shareholders will ask questions of management performance and seek change of leadership,” InGovern founder Shriram Subramanian told Reuters. InGovern is a corporate governance research and proxy advisory firm.
Boardroom Friction
Jagdishan, whose term as CEO ends in October 2026 unless extended, took over the helm from HDFC Bank founder and CEO Aditya Puri in 2020.
Chakraborty joined as chairman in April 2021. The former top bureaucrat soon began involving himself closely in operational and management matters—an unusual move for a non-executive director in an Indian corporate boardroom, four of the people cited earlier said.
He also intervened in HR policy as a member of the nomination and remuneration committee and, in at least one instance, changed the performance ratings of some senior executives—a prerogative of the chief executive officer, according to another former senior executive.
HDFC Bank did not respond to a request for comment from Jagdishan sent via the bank’s official spokesperson.
In 2024, Chakraborty opposed a proposal to approve an equity investment by Japan’s Mitsubishi UFJ Financial Group in HDFC Bank’s consumer finance arm. While Jagdishan advocated bringing in a foreign lender as a strategic partner, the former chairman opposed the move, arguing against the involvement of a foreign entity in an Indian company and objecting to the lack of a bidding process in a potential investment, the people said. The plan ultimately collapsed.
Chakraborty, when asked by Reuters whether there were persistent differences with the CEO and if these had been raised at the board level, said:
“There is a structure to handling various governance and accountability issues,” Chakraborty told Reuters over a text message, when asked whether there were persistent differences with the CEO and if those had been raised at the board level. “If the issues need a finality in the board, then they are placed there. It’s a well-laid-out process and it evolves along with changing times,” he said, without elaborating or commenting on other questions.
Besides the differences between the two, the relationship of Jagdishan with some other top executives has also been a concern for investors and staff. That concern came to the fore in an analyst call that the bank held after Chakraborty’s resignation.
When asked on the call if there was a power struggle at the management level, especially between the CEO and Deputy MD Kaizad Barucha or other top executives, Jagdishan played down those concerns.
“Kaizad is a very dear colleague, and I have the highest regard and respect for him,” he said on the call, and added that Barucha, who has the responsibility for the bank’s entire loan book, “will only get more responsibilities as we move forward”.
Barucha did not respond to Reuters request for comment.
HDFC Merger Overhang
The board acrimony also adds to concerns internally about limited gains from the lender’s $40 billion merger with its largest shareholder in 2023, and about a stock that has underperformed peers over the past five years, the people said.
HDFC Bank’s absorption of housing financier HDFC Ltd. in 2023 added assets of ₹7.23 lakh crore but brought in a relatively small deposit base, squeezing margins, hurting returns and dragging on growth.
The bank’s lending margin has dipped to 3.35% now from 4.1% before the merger. It also had to slow asset growth to help steady its loan-to-deposit ratio, which rose to around 110% post merger from 86%–87% prior to it.
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While the CEO inevitably bears some responsibility when a stock underperforms, the bank’s challenges stem from merger-related execution risks, said Gary Tan, a portfolio manager in the emerging markets equity team at Allspring Global Investments, which owns HDFC shares.
Steve Lawrence, CIO of US-based Balfour Capital Group, said that the current situation at HDFC Bank was one of “cyclical execution pressure rather than structural leadership failure”.
“Markets demand clarity—and when execution visibility declines, leadership perception becomes a factor in valuation compression,” he said.
