There is a particular kind of institutional crisis that does not announce itself with a single bang. It accumulates. It surfaces in resignation letters written in careful bureaucratic language. It appears in stock charts that shed ₹1.35 lakh crore in four trading sessions. It arrives in vigilance reports that nobody was supposed to read publicly, and in courtroom hearings where a bank's top executive stands accused of financial impropriety before the charge is eventually quashed on a technicality. This is the story of HDFC Bank under Sashidhar Jagdishan — and it is not yet over.
Jagdishan's term as Managing Director and CEO expires in October 2026. The Nomination and Remuneration Committee has to recommend his third term to the RBI. The regulator, according to people familiar with the process, has made clear it wants a permanent chairman in place before any such recommendation is finalised. There is, as of today, no permanent chairman. The man who last held the post resigned in March citing "certain happenings and practices" that were "not in congruence" with his personal ethics. The bank has been operating with an interim chairman — Keki Mistry — since then. The RBI is reportedly pushing the board to accelerate the chairman search. The board is moving slowly. And somewhere in this procedural tangle sits Jagdishan himself, whose fate as one of India's most powerful bankers is now caught between an ethics storm he cannot fully extinguish and a regulator that appears in no rush to validate him.
<hr>The Scheme That Wasn't Marketing
To understand what cracked the edifice, you have to go back to 2021. HDFC Bank's senior management had identified a prize target: the Maharashtra State Road Development Corporation, a state infrastructure agency sitting on land acquisition funds estimated at ₹25,000 crore. MSRDC officials, through what internal records describe as a "verbal" understanding with a bank zonal head, signalled they expected a return of 6.01% on their deposits — nearly double the 3.5% savings rate that any ordinary depositor would receive.
A bank cannot offer differential interest rates to individual depositors. The RBI's Master Directions on Interest Rates on Deposits are unambiguous on this. So, allegedly, someone at the top decided that if the money couldn't go as interest, it would go another way.
What followed was an arrangement that an internal vigilance report later described in damning detail. The differential — a total of ₹45 crore — was routed through the bank's marketing budget. On paper, it became a "sponsorship" for a Road Safety Awareness Campaign run by MSRDC. Four local marketing vendors were used as pass-through entities. No legal team vetted it. No compliance sign-off was obtained. The word "6.01%" appeared nowhere in any public document related to the arrangement.
The vigilance report records multiple officials testifying that Jagdishan "participated in the call convened to examine how the bank could compensate MSRDC and was part of the decision to provide the differential interest through the marketing budget as a one-off arrangement." The CFO, Srinivasan Vaidyanathan, was also present at these discussions.
HDFC Bank's official position has been that the arrangement was within the rules, that no depositor was disadvantaged, and that the payments reflected legitimate marketing activity. The RBI, after its own review, did not impose penalties. Independent law firms appointed by the bank reportedly found no criminal wrongdoing. The Bombay High Court quashed an FIR against Jagdishan relating to the Lilavati Trust in May 2026, calling the lower court's order a "gross abuse of criminal process."
Clean, then? Not quite.
<hr>The Chairman Who Walked Out
On March 17, 2026, Atanu Chakraborty — an IAS officer of some distinction, a former Economic Affairs Secretary, a man not given to theatrical exits — submitted his resignation as HDFC Bank's non-executive chairman. He cited no specific incident. He did not name Jagdishan. He simply said that what he had observed over two years inside the bank was incompatible with his values.
Markets understood the subtext immediately. HDFC Bank's share price fell roughly 11-12% in the days that followed. Approximately $21 billion in market capitalisation evaporated. Three external law firms — Trilegal, Wadia Ghandy & Co., and a US-based firm — were commissioned to investigate. Their findings have not been made public.
What is known is this: Chakraborty's tenure had been marked by friction with Jagdishan's management team. He reportedly opposed the CEO's plan to sell a minority stake in HDB Financial Services to Japan's Mitsubishi UFJ Financial Group. He pushed for tighter oversight of a Dubai operation that a local regulator had restricted from adding new clients — lapses that Jagdishan's team characterised as "technical" but that Chakraborty apparently did not regard as such. The chairman and the CEO, in other words, had been pulling in different directions for some time. The chairman blinked first — but his resignation statement was written in a way that ensured the CEO could not easily declare victory.
<hr>The Vacancy at the Top
HDFC Bank is now caught in an uncomfortable loop. It cannot appoint a new chairman without RBI clearance. It cannot secure a clean RBI verdict on Jagdishan's third term without a chairman to co-sign the recommendation. The external law firm findings remain undisclosed. The governance architecture that once provided at least a formal counterweight to executive power — the HDFC Ltd promoter block — dissolved entirely when the parent merged into the bank in 2023. There is no controlling shareholder. There is no founding family. There is no single institutional voice with both the standing and the incentive to demand accountability in a direct way.
What there is, instead, is a ₹13-lakh-crore bank running on institutional inertia, with a CEO whose reappointment hangs on decisions that no one appears eager to make, overseen by a board that three months after the chairman walked out still cannot tell shareholders what the external investigators found.
The machine that Aditya Puri built over twenty-six years was always described as a strength. The systems, the processes, the culture of execution over debate. What that machine cannot survive is the moment when the question of who runs it becomes genuinely contested — because there is no one left in the architecture with both the authority and the will to answer it.
That moment has arrived. Jagdishan is still in the building. The question is for how long. |
