Three challenges facing HDFC Bank’s new CEO
When Anup Bagchi takes charge as managing director and chief executive of HDFC Bank on 27 October, he will inherit an institution with a robust balance sheet that also faces questions over its reputation, leadership continuity and market perception.
The incoming chief, who has already begun engaging with customers, regulators and stakeholders, faces the challenge of rebuilding confidence after a series of controversies, preventing further departures from senior management and reviving the growth engines that once distinguished India’s largest private-sector bank.
The urgency is evident in the bank’s market performance. So far this fiscal year (FY27), HDFC Bank's shares have fallen by 6%. In FY26, the stock was down by 16%, Bloomberg data showed. On Monday, the stock ended 0.6% lower at ₹688.20 apiece.
The bank’s valuation premium over peers has also narrowed. As of Monday, the lender traded at around 13.28 times trailing earnings and 1.76 times book value, compared with 16.87 times earnings and 2.60 times book value for ICICI Bank, and 10.22 times earnings and 1.50 times book value for State Bank of India, according to Value Research.
The top priority
The bank has faced a series of controversies, including allegations of the mis-selling of Credit Suisse additional tier-I (AT1) bonds, questions about the handling of a bulk depositor’s account, and an internal investigation into the alleged leakage of confidential information by two executives. The abrupt departure of former chairman Atanu Chakraborty in March added to concerns about governance and internal differences.
Rebuilding confidence must be the immediate priority, said Karan Gupta, financial sector ratings head at India Ratings and Research. “He has to ensure HDFC Bank runs efficiently,” Gupta said, pointing to the recent challenges and the departure of senior executives.
For Nirav Shah, MD and CEO of Equirus Capital, the task goes beyond financial performance. HDFC Bank has historically commanded a premium over its peers, built on its reputation for consistency, governance and execution.
“Sometimes it is also about non-financial metrics like how people perceive you as a bank,” Shah said. “Rebuilding the whole premiumness of the bank is where it’s going to be very important.”
Restoring that standing will also mean winning back overseas investors. Shah said domestic institutions continue to view the lender as a strong and solid franchise, but foreign investors have lost some confidence. Rebuilding foreign institutional investors' (FII) confidence will be another important task for Bagchi.
FIIs have also reduced their exposure, with their shareholding down to 39% in the September quarter from 42% in June, according to recent shareholding data.
Stemming attrition
Bagchi’s transition comes amid a reshuffle at the top. Another key priority for him will be to stem employee attrition. Deputy managing director Kaizad Bharucha, one of the bank’s longest-serving executives, is set to step down on 31 December, while former CEO Sashidhar Jagdishan’s tenure ends on 26 October.
The departures raise questions about whether more senior executives will leave and how Bagchi will establish his authority in an institution shaped by decades of internal leadership.
“People have to see him as a leader, not as someone who is just filling in the position. People have to look up to him, and the need to see him as a leader is absolutely necessary for him,” Shah said.
He also believes the bank could benefit from bringing in experienced external leaders to complement its traditionally homegrown talent, while developing the next generation of internal leadership.
Restoring competitive edge
The third challenge is operational, which is restoring HDFC Bank’s competitive edge in retail lending, low-cost deposits and profitability following its merger with Housing Development Finance Corp. in 2023.
HDFC Bank, which historically outperformed private-sector peers on loan growth and returns, now stands closer to the industry average. For the September quarter, net profit rose 5% year-on-year to ₹19,510 crore, while the net interest margin declined to 3.16% from 3.26% a quarter ago, and the current account and savings account (CASA) ratio also slipped to 31.6%.
“Bagchi will likely oversee a period of recalibration while engaging regulators and stakeholders to define organizational priorities. His mandate is clear: revive retail loan growth, reform the CASA franchise, and, with Bharucha's exit also confirmed, stem further employee attrition,” Macquarie said in a 19 October report.
Retail deposits rose 11% on-year and continued to stay soft in line with the June quarter, but still lower than State Bank of India and ICICI Bank, Jefferies said in a report on 18 October.
“This is despite its branch expansion, potential to cross-sell from merger clients, and competitive rates. Also, its loan mix is more conservative with a higher share of PSU and high-quality corporate loans. With the new management taking charge, a normalization here will help improve margins and return on equity,” the report said.
Bagchi has described HDFC Bank as a “very process-driven institution” and said he would work alongside its team to take it forward. However, the real test will be whether he can translate that institutional strength into renewed confidence, leadership continuity and sustained growth.