HDFC Bank faces a series of challenges just days before Anup Bagchi assumes the role of chief executive, with a fresh internal inquiry, a run of unanswered questions from the spring, and a merger that has been slower to pay off than investors wanted all waiting for him.
Internal Inquiry Into Senior Executives
India’s largest private lender by market valuation is conducting an internal investigation into two senior executives, according to Bloomberg. The inquiry reportedly found evidence that they disclosed confidential business strategies and potentially market-sensitive information to outsiders, though the bank has not disclosed whether any of the information was misused. HDFC Bank acknowledged the review but declined to discuss its findings or name the executives, stating it will take suitable action once the process concludes.
Investigators are examining email exchanges among senior managers, focusing on potential leaks related to the Dubai business, payments linked to the Maharashtra State Road Development Corporation (MSRDC), friction between executives, and the strained equation between former chairman Atanu Chakraborty and outgoing managing director and CEO Sashidhar Jagdishan. The outcome of the probe will reach a new management team, as Jagdishan retires on October 26 and Bagchi begins the next day. The investigation also scrutinizes communications regarding strategic decisions made during the 2023 merger with HDFC Ltd, which expanded the bank’s balance sheet but introduced complexities in integrating long-tenor home loans and funding requirements.
Resignation Letter and Market Impact
The unease surrounding the bank dates back to March, when Chakraborty resigned as part-time chairman and independent director. His letter stated that practices observed over the previous two years conflicted with his personal values and ethics, though it provided no specific details. The shares dropped more than 5% that day, with Bloomberg estimating over $7 billion in market value lost. The board responded that Chakraborty had not highlighted specific regulatory or operational concerns, and the Reserve Bank of India affirmed its periodic assessment found no material issues with the bank’s governance.
Problems in Dubai Operations
Chakraborty’s departure also drew scrutiny to the lender’s overseas operations. The bank had dismissed three senior executives after an internal review of alleged mis-selling of Credit Suisse Additional Tier-1 (AT1) bonds through its Dubai operations. It admitted gaps in client onboarding at its Dubai International Financial Centre branch and implemented corrective measures. Dubai’s financial regulator had previously barred the branch in September 2025 from onboarding new clients and conducting certain financial-services activities.
In August, over 75 investors who purchased Carlisle’s Luxembourg Life Fund through Dubai operations prepared to approach authorities in India and abroad. They alleged losses exceeding $13.5 million, claiming the insurance-linked product was marketed as capital protected while leverage amplified exposure during the Covid-19 market crash. Some investors also reported denied redemptions for years. These remain unverified claims, not established findings of wrongdoing.
Merger Integration and Profitability Pressures
Net interest margin fell to 3.26% in the June quarter from 4% pre-merger, as the bank has been rebalancing its loans and deposits while competing for low-cost deposits and managing profitability pressures. Investors continue to await the expected benefits from the integration.
The succession question was settled on October 1, when the bank said RBI had approved Bagchi, formerly of ICICI Group, as CEO and MD for three years. He has said that much of the difficult post-merger work is behind the bank, though the transformation continues, and that he will first study the balance sheet, profitability and the institution before deciding how to proceed. The leak probe remains open, with its outcomes and potential actions against the executives still unknown.
