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Crowning or fading glory: What will the new HDFC Bank chief deliver?

The bank is facing a perception crisis with high-level exits and the RBI stricture, just as the competitive landscape is changing with freshly-minted fintech companies  

In his 26-year-long illustrious stint, at the helm of the country’s premier private sector bank, Aditya Puri won innumerable accolades. They came not just from India, but from across the world. The Economist in its November 2020 edition acknowledged Puri as the “world’s best banker” for “creating something from nothing and delivering long-term shareholder return while supporting the economy”.

HDFC Bank was incorporated in 1994 under a strategic alliance between HDFC and the UK-based NatWest Markets. In March 1995, it went public raising Rs.50 million, through an at-par IPO, which was oversubscribed 55x. The ‘something from nothing’ remark can be gauged from this one statistic — since May 1995, the stock has delivered a whopping 33.64% CAGR. Simply put, Rs.10,000 invested then, would be Rs.14.1 million today. Not to mention the Rs.457,950 worth of dividends. At its listing price of Rs.40 in 1995, on equity of 2 billion shares, the bank was worth Rs.8 billion. Today, it is worth Rs.7.91 trillion! The bank has the highest weightage in the Nifty 50, at 11.21%.

Just as it seemed to be reaching another pinnacle, the bank began being weighed down. First, there were market whispers when the outgoing CEO cashed out his entire holding. Then, the market began getting antsy about top-level executives resigning in significant numbers and, finally, the RBI came down hard on HDFC Bank, when the latter’s digital services stalled a few times. And, all of this was happening against the backdrop of the pandemic, which has given rise to concerns over the possibility of retail loans turning bad. 

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Editor's Note

Why replicating Aditya Puri's iconic leadership could be a tough ask

While HDFC Bank’s culture is one of performance with conservatism, the next couple of years will be defining for India’s most admired bank

As much as the banking business seems lucrative, every few years it goes through a turmoil that takes down a few players. That has been pretty much the case across the world. Despite a fairly high level of regulatory scrutiny, it’s prone to frauds. But, even if you keep that aside, lending has proved to be a messy business. 

The Indian banking sector has had its