Specialist in Indian Banking and Economic Research

Hemindra Hazari

There is a surprising change in the public profiles of the Chief Executive Officers (CEOs) of India’s first and second largest private sector banks, <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> and <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a> . What are the implications?Both Sashidhar Jagdishan and Sandeep Bakshi stepped into the shoes of high-profile predecessors: the iconic Aditya Puri is credited with the US$ 100 bn plus valuation of HDFC Bank, while Chanda Kochhar continued to build on the ICICI Bank franchise; she was later sacked in disgrace over a conflict of interest.  For better or worse, the ‘brands’ of the respective banks became closely identified with Puri and Kochhar. As compared with their high profile predecessors, Jagdishan and Bakshi maintain a low media profile, while attempting to change the culture, the very DNA of their organizations. At the same time, they are trying to meet the street’s high expectations regarding growth and asset quality.Bakshi took charge at ICICI Bank on October 15, 2018, and has remained virtually invisible, unlike his predecessor, who constantly figured in the media. He has preferred to remain mute and let the ICICI Bank share price do the talking. Atypically by ICICI Bank standards, even when the bank made undisputed gains in business (e.g., the increase in its credit card market share by spends), it has declined to make any public statement or provide access and publicity to its achievement. One rarely finds any formal media interview with Bakshi since he took charge as the CEO. During the bank’s results call, he provides a brief introduction and thereafter allows his concerned heads to elaborate on the bank’s performance. Such a demeanour by a senior ICICI Bank executive is welcome but also highly abnormal in the leadership history of this institution.This analyst has covered ICICI Bank (including the erstwhile ICICI) for nearly 23 years. For nearly two decades, under the leadership of KV Kamath and subsequently Chanda Kochhar, the institution declined to interact with him on account of his critical <a href="https://hemindrahazari.com/1999/01/07/icici-preference-capital-included-in-tier-1-capital/" target="_blank" rel="noopener">reports</a>. The erstwhile ICICI leaders who transitioned to the bank and the coterie surrounding them were noted for their arrogance and intolerance towards any criticism levelled at the institution. It was therefore surprising that ICICI Bank reinitiated contact with this analyst after a gap of nearly 20 years, soon after Bakshi took charge as CEO. This is all the more surprising as it was this analyst who had exposed Sandeep Bakshi’s shameful conduct in <a href="https://hemindrahazari.com/2018/06/22/is-sandeep-bakhshi-fit-and-proper-to-be-coo-of-icici-bank/" target="_blank" rel="noopener">authorising</a>  a false criminal complaint against a whistle blower when he was CEO, ICICI Prudential Life Insurance. (That false complaint had led to the innocent Nitin Balchandani being in jail for 30 days; he was subsequently released by the Rajasthan High Court for lack of evidence.)Like other banking analysts, this analyst had interacted with Jagdishan since he was the Chief Financial Officer (CFO), HDFC Bank. In the course of those interactions, Jagdishan came across as a straight-talking individual who did not duck or sidestep critical questions and issues and was candid enough to admit to the bank’s mistakes and shortcoming. This analyst published many reports (<a href="https://hemindrahazari.com/2019/12/09/hdfc-banks-digital-disaster-no-recovery-plan/" target="_blank" rel="noopener">here</a>, <a href="https://hemindrahazari.com/2020/02/11/can-a-director-of-hdfc-bank-comment-on-bank-matters-in-his-personal-capacity/" target="_blank" rel="noopener">here</a> and <a href="https://hemindrahazari.com/2020/12/28/hdfc-bank-honey-i-shrunk-the-chief-risk-officer/" target="_blank" rel="noopener">here</a>) sharply critical of HDFC Bank and atleast one after Jagdishan took charge. Even though Jagdishan disagreed with some of these views, he continued to engage with this analyst. This is most unlike the conduct of HDFC Bank’s parent, <a href="https://www.smartkarma.com/entities/housing-development-finance-corporation" target="_blank" data-smartkarma-citation="entities:252:1" rel="noopener">HDFC Limited (HDFC IN)</a>, whose veteran leadership is respected, but cannot tolerate the slightest criticism, and declines to reply to any queries from this analyst since a critical <a href="https://hemindrahazari.com/2018/04/19/more-transparency-was-expected-from-hdfc-regarding-its-reliance-naval-exposure/" target="_blank" rel="noopener">report</a> was released.In corporate India, reared on leader worship, it is rare for CEOs to publicly accept mistakes and apologise, as they believe it would diminish their public image. It is even rarer for them to tolerate criticism and the instinct of many ‘revered corporate icons’ is to boycott critics, both as a punishment and to serve as a warning to any other potential dissenters. For all the sermons they preach on corporate governance, in reality public listed companies are treated like their personal fiefdoms, and their authority is unchallenged by pliant boards of directors, obedient business journalists and tame sell-side analysts.It is therefore refreshing to note the apparent decision of Jagdishan and Bakshi to maintain low public visibility, at least for the time being, and for both to tolerate critics and continue to engage with them. Jagdishan has even acknowledged and publicly apologised for HDFC Bank’s failings. Reportedly, the new leaderships at both banks are attempting to change the culture of their respective organisations in a way that will ultimately benefit all stakeholders, including customers and employees, while doing their business in a low profile manner.To date, the stock market has rewarded Bakshi and penalised Jagdishan, perhaps because investors have some concerns that the latter’s more humane approach may disrupt the ruthlessly efficient business model built by Aditya Puri. However, this analyst believes that in both institutions the new leadership may eventually prove rewarding to investors. Rather than base the bank’s brand on a celebrity CEO, it is preferable to base it on solid and stable systems.

There is a surprising change in the public profiles of the Chief Executive Officers (CEOs) of India’s first and second largest private sector banks, HDFC Bank (HDFCB IN) and ICICI Bank Ltd (ICICIBC IN) . What are the implications?Both Sashidhar Jagdishan and Sandeep Bakshi stepped into the shoes of high-profile predecessors: the iconic Aditya Puri is credited with the US$ 100 bn plus valuation of HDFC Bank, while Chanda Kochhar continued to build on the ICICI Bank franchise; she was later sacked in disgrace over a conflict of interest.  For better or worse, the ‘brands’ of the respective banks became closely identified with Puri and Kochhar. As compared with their high profile predecessors, Jagdishan and Bakshi maintain a low media profile, while attempting to change the culture, the very DNA of their organizations. At the same time, they are trying to meet the street’s high expectations regarding growth and asset quality.Bakshi took charge at ICICI Bank on October 15, 2018, and has remained virtually invisible, unlike his predecessor, who constantly figured in the media. He has preferred to remain mute and let the ICICI Bank share price do the talking. Atypically by ICICI Bank standards, even when the bank made undisputed gains in business (e.g., the increase in its credit card market share by spends), it has declined to make any public statement or provide access and publicity to its achievement. One rarely finds any formal media interview with Bakshi since he took charge as the CEO. During the bank’s results call, he provides a brief introduction and thereafter allows his concerned heads to elaborate on the bank’s performance. Such a demeanour by a senior ICICI Bank executive is welcome but also highly abnormal in the leadership history of this institution.This analyst has covered ICICI Bank (including the erstwhile ICICI) for nearly 23 years. For nearly two decades, under the leadership of KV Kamath and subsequently Chanda Kochhar, the institution declined to interact with him on account of his critical reports. The erstwhile ICICI leaders who transitioned to the bank and the coterie surrounding them were noted for their arrogance and intolerance towards any criticism levelled at the institution. It was therefore surprising that ICICI Bank reinitiated contact with this analyst after a gap of nearly 20 years, soon after Bakshi took charge as CEO. This is all the more surprising as it was this analyst who had exposed Sandeep Bakshi’s shameful conduct in authorising  a false criminal complaint against a whistle blower when he was CEO, ICICI Prudential Life Insurance. (That false complaint had led to the innocent Nitin Balchandani being in jail for 30 days; he was subsequently released by the Rajasthan High Court for lack of evidence.)Like other banking analysts, this analyst had interacted with Jagdishan since he was the Chief Financial Officer (CFO), HDFC Bank. In the course of those interactions, Jagdishan came across as a straight-talking individual who did not duck or sidestep critical questions and issues and was candid enough to admit to the bank’s mistakes and shortcoming. This analyst published many reports (here, here and here) sharply critical of HDFC Bank and atleast one after Jagdishan took charge. Even though Jagdishan disagreed with some of these views, he continued to engage with this analyst. This is most unlike the conduct of HDFC Bank’s parent, HDFC Limited (HDFC IN), whose veteran leadership is respected, but cannot tolerate the slightest criticism, and declines to reply to any queries from this analyst since a critical report was released.In corporate India, reared on leader worship, it is rare for CEOs to publicly accept mistakes and apologise, as they believe it would diminish their public image. It is even rarer for them to tolerate criticism and the instinct of many ‘revered corporate icons’ is to boycott critics, both as a punishment and to serve as a warning to any other potential dissenters. For all the sermons they preach on corporate governance, in reality public listed companies are treated like their personal fiefdoms, and their authority is unchallenged by pliant boards of directors, obedient business journalists and tame sell-side analysts.It is therefore refreshing to note the apparent decision of Jagdishan and Bakshi to maintain low public visibility, at least for the time being, and for both to tolerate critics and continue to engage with them. Jagdishan has even acknowledged and publicly apologised for HDFC Bank’s failings. Reportedly, the new leaderships at both banks are attempting to change the culture of their respective organisations in a way that will ultimately benefit all stakeholders, including customers and employees, while doing their business in a low profile manner.To date, the stock market has rewarded Bakshi and penalised Jagdishan, perhaps because investors have some concerns that the latter’s more humane approach may disrupt the ruthlessly efficient business model built by Aditya Puri. However, this analyst believes that in both institutions the new leadership may eventually prove rewarding to investors. Rather than base the bank’s brand on a celebrity CEO, it is preferable to base it on solid and stable systems.

Less News Is Good News: Surprising Change in the Public Profiles of HDFC Bank and ICICI Bank CEOs

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Not So Stable: According to the Reserve Bank of India (RBI), gross NPLS are not anticipated to be as bad as originally believed. In addition, the RBI retains its cautious outlook on MSME credit risk; and
* Rose Colored Glasses: As we have highlighted in numerous individual Indian bank notes, credit quality continued to deteriorate at an accelerated pace prior to the second wave of COVID-19. While many financials are already considered technically insolvent, the reality is that there has been absolutely no let up in the breakdown of credit quality.

*Not So Stable: According to the Reserve Bank of India (RBI), gross NPLS are not anticipated to be as bad as originally believed. In addition, the RBI retains its cautious outlook on MSME credit risk; and
* Rose Colored Glasses: As we have highlighted in numerous individual Indian bank notes, credit quality continued to deteriorate at an accelerated pace prior to the second wave of COVID-19. While many financials are already considered technically insolvent, the reality is that there has been absolutely no let up in the breakdown of credit quality.

Reserve Bank Of India – FSR Is Very Unrealistic

*Extending The Emergency Funding Plan: The Emergency Credit Line Guarantee Scheme (ECLGS) for Indian SMEs was launched in May 2020 under the Indian government’s ‘Atmanirbhar’ or self-sufficiency package in order to help offset the weakened economic conditions resultant of COVID-19. ECGLS was subsequently expanded in November 2020 to include 26 additional stressed sectors. In its latest attempt at forbearance, the Indian government just expanded its ECLGS from INR 3 tn to INR 4.5 tn; and *Kick That Can: Banks have already on-lent INR 2.7 tn under the ECLGS, and this recent announcement should further allow India to kick the can of stressed loans down the road. We remind the Indian government that if you’re extending, you are pretending.  That said, net new NPL growth should still accelerate through FYE 2022 given what appears to government crisis mismanagement which should extend the duration of the second COVID-19.

*Extending The Emergency Funding Plan: The Emergency Credit Line Guarantee Scheme (ECLGS) for Indian SMEs was launched in May 2020 under the Indian government’s ‘Atmanirbhar’ or self-sufficiency package in order to help offset the weakened economic conditions resultant of COVID-19. ECGLS was subsequently expanded in November 2020 to include 26 additional stressed sectors. In its latest attempt at forbearance, the Indian government just expanded its ECLGS from INR 3 tn to INR 4.5 tn; and *Kick That Can: Banks have already on-lent INR 2.7 tn under the ECLGS, and this recent announcement should further allow India to kick the can of stressed loans down the road. We remind the Indian government that if you’re extending, you are pretending.  That said, net new NPL growth should still accelerate through FYE 2022 given what appears to government crisis mismanagement which should extend the duration of the second COVID-19.

*New Regulation, New Loopholes: The Reserve Bank of India (RBI) has finalized rules for non-bank financial company (NBFC) dividend payout ratios at a maximum of 50%. The methodology is predicated on the net NPL ratio and CAR. The new proposal is riddled with loopholes, as NBFCs can easily manipulate these ratios; and*Well-Placed NBFCs: Excluding LIC Housing Finance (LICHF.IN) and Shriram Transport (SHTF.IN), most large NBFCs are well placed to meet the proposed dividend cap if the guidelines are made applicable from the previous year.

*New Regulation, New Loopholes: The Reserve Bank of India (RBI) has finalized rules for non-bank financial company (NBFC) dividend payout ratios at a maximum of 50%. The methodology is predicated on the net NPL ratio and CAR. The new proposal is riddled with loopholes, as NBFCs can easily manipulate these ratios; and*Well-Placed NBFCs: Excluding LIC Housing Finance (LICHF.IN) and Shriram Transport (SHTF.IN), most large NBFCs are well placed to meet the proposed dividend cap if the guidelines are made applicable from the previous year.

Reserve Bank of India – Wrong Rule At Wrong Time

The integrity of audits in private sector banks and non-bank financial companies (including housing finance) has received a major boost, while large global and domestic audit firms have been dealt a body blow by the Reserve Bank of India’s <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI258A67AD30976F44929FA2AB2B41DC805D.PDF" target="_blank" rel="noopener">new</a> guidelines for the appointment of statutory auditors for the commercial banks and NBFCs. In future the executive and founder-management of private sector financial intermediaries will find it more difficult to exert influence on their statutory auditors. 
Henceforth, all the audit firm affiliates which were treated as separate entities, but under the same network, will be treated as a single entity. It was common practice for one entity in the audit firm group to be awarded the audit while other entities in the group were given lucrative assignments while simultaneously issuing a “no conflict of interest certificate.” Such an arrangement compromised the entire edifice of audit, and there were no disclosures. The new system entails providing such disclosures to the RBI prior to getting the regulator’s approval.
Till FY2019, global audit firms had a stranglehold on the market of large private sector banks. But their negligent conduct, bordering on complicity, in major corporate frauds in India and abroad has led to a valid rethink regarding their capabilities. Accordingly, the regulator’s guidelines released on April 27, 2021 will curtail their business in the Indian financial sector.

The integrity of audits in private sector banks and non-bank financial companies (including housing finance) has received a major boost, while large global and domestic audit firms have been dealt a body blow by the Reserve Bank of India’s new guidelines for the appointment of statutory auditors for the commercial banks and NBFCs. In future the executive and founder-management of private sector financial intermediaries will find it more difficult to exert influence on their statutory auditors. 
Henceforth, all the audit firm affiliates which were treated as separate entities, but under the same network, will be treated as a single entity. It was common practice for one entity in the audit firm group to be awarded the audit while other entities in the group were given lucrative assignments while simultaneously issuing a “no conflict of interest certificate.” Such an arrangement compromised the entire edifice of audit, and there were no disclosures. The new system entails providing such disclosures to the RBI prior to getting the regulator’s approval.
Till FY2019, global audit firms had a stranglehold on the market of large private sector banks. But their negligent conduct, bordering on complicity, in major corporate frauds in India and abroad has led to a valid rethink regarding their capabilities. Accordingly, the regulator’s guidelines released on April 27, 2021 will curtail their business in the Indian financial sector.

RBI Norms - Audit Giants Can’t Continue Their Cosy Arrangements with Private Banks and NBFCs

India

Housing Development Finance Corporation (HDFC) was an Indian private-sector mortgage lender, widely recognized as the largest housing finance company in India, offering long-term home loans to individuals and corporations for housing purposes. It also provided construction finance to housing development businesses. The company had diversified interests through its associate and subsidiary companies in banking, life and general insurance, asset management, venture capital, and deposit services. HDFC was incorporated in 1977 and headquartered in Mumbai, India. On July 1, 2023, HDFC merged with HDFC Bank, its subsidiary.

Housing Development Finance Corporation (HDFC IN)

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Housing Development Finance Corporation (HDFC IN)

Less News Is Good News: Surprising Change in the Public Profiles of HDFC Bank and ICICI Bank CEOs

Both Jagdishan and Bakshi are implementing changes for the long haul. Rather than base the bank’s brand on a celebrity CEO, it is preferable to...

Hemindra Hazari

Reserve Bank Of India – FSR Is Very Unrealistic

RESERVE BANK OF INDIA: According to the RBI, NPLS are not anticipated to be as bad. This couldn't be further from the truth. NPLs continue to...

Thomas J. Monaco

India Financials – Plop Plop Fizz Fizz

INDIA FINANCIALS: ECLGS was launched in May 2020 to offset poor economic conditions. ECGLS has again been expanded from INR 3 tn to INR 4.5 tn....

Thomas J. Monaco

Reserve Bank of India – Wrong Rule At Wrong Time

RESERVE BANK OF INDIA: The RBI has finalized rules for NBFC dividend payout ratios at 50% - predicated on the net NPL ratio and CAR. The new...

Thomas J. Monaco

RBI Norms - Audit Giants Can’t Continue Their Cosy Arrangements with Private Banks and NBFCs

The integrity of audits in banks & NBFCs has received a major boost, while global audit firms have been dealt a body blow by the RBI’s new...

Hemindra Hazari

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