The governance concerns that had recently clouded India’s largest private sector lender, HDFC Bank, appear to be easing. According to a Reuters report, law firms reviewing the Bank’s internal workings are not expected to flag any major lapses, according to sources cited by Reuters.
The law firms are set to submit their report this month. The Reuters report added that this development could potentially clear the path for the bank to proceed with the reappointment of its chief executive officer, Sashidhar Jagdishan.
Financialexpress.com could not verify this news independently.
What triggered the review
The concerns came to forth in March earlier this year, when Atanu Chakraborty stepped down as HDFC Bank’s non-executive chairman. In his resignation, he cited an “incongruence” between his personal values and the bank’s practices but offered no specifics.
HDFC Bank’s stock fell nearly 14% in the days that followed, wiping out roughly $16 billion in market value. The sell-off was sharp enough to draw a rare public statement from the Reserve Bank of India, which sought to reassure investors and depositors that the bank’s fundamentals remained sound. The RBI had said at the time that there were “no material concerns on record as regards its conduct or governance,” Reuters reported.
What the law firms looked at
To get to the bottom of Chakraborty’s concerns, HDFC Bank brought in two Mumbai-based law firms, Trilegal and Wadia Ghandy & Co. The firms were asked to go through board meeting minutes and video recordings of board and extraordinary general meetings over the past three years. Their specific mandate was to check whether Chakraborty had raised any governance concerns during his tenure, and if so, whether those concerns were addressed properly, the Reuters report said.
According to Reuters’ sources, the firms found that all issues raised at the board level were handled in line with prescribed processes.
CEO reappointment in focus
As per the Reuters report, the chairman’s exit had created uncertainty around one specific and time-sensitive matter: the reappointment of CEO Sashidhar Jagdishan, whose current three-year term ends in October. HDFC Bank needs to apply to the RBI for approval, with the deadline falling at the end of this month, Reuters reported.
According to Reuters, once the law firms formally hand over their report to the bank’s board, which will then forward it to the RBI, HDFC Bank is expected to propose Jagdishan for reappointment. A third source familiar with RBI‘s thinking told Reuters that the central bank sees no reason that would stand in the way of his reappointment.
Why this matters
HDFC Bank is not just any lender. As per the Reuters report, it counts over 120 million customers and holds just over a tenth of India’s total banking deposits. It is classified as a systemically important bank, meaning its stability has direct consequences for the broader financial system. It is also majority-owned by foreign institutional investors, which makes any governance uncertainty particularly sensitive for market sentiment.
Adding to the pressure: the bank’s stock has underperformed since its $40 billion merger with parent company HDFC Ltd in 2023, declining about 5% since then. In the same period, rival ICICI Bank has gained 33%, and the benchmark Nifty 50 index is up 24%, as per the Reuters report.
What analysts have said
According to the Reuters report, Proxy advisory firm InGovern Research Advisory Services said last month that Chakraborty’s resignation appeared to stem from personal differences rather than any systemic problem at the bank that could hurt shareholder value, a view that, if the law firms’ findings hold, now appears to be borne out.
HDFC Bank share price performance
HDFC Bank’s stock price has been up 3.11% as of market closing on May 6, 2026. The company’s share price has been up 3.29% in the past month. However, the stock has been down 17.47% in the past year.