For Keki Mistry, it is a return to the top position born out of sudden necessity. It doesn’t matter if it’s only for three months. The man who built India’s largest mortgage financier from scratch is now the interim chairman of the combined HDFC Bank Ltd.
The Reserve Bank of India swiftly approved Mistry as interim chairman of the “systemically important bank”, following his shock resignation by part-time chairman Atanu Chakraborty over what it called “ethical concerns”. He immediately got to work. Less than 12 hours after the former bureaucrat’s exit, he was speaking to the media to calm the nerves of investors and customers, even as the stock of India’s largest private bank fell.
“There could have been some relationship issue between the two [Atanu] Chakraborty and the management (of the bank). “It may have manifested over time,” he told media and analysts on a call earlier today.
“None of us is aware of the issues raised by Chakraborty [resignation] Letters…differences on minor issues come up from time to time…(but) no important issue was raised.” He said, ”There is no power struggle within the bank.”
With that out of the way, Mistry’s immediate task will be to steady the ship which is sailing in choppy waters following the mega HDFC Bank merger in 2023 as, according to Chakraborty, “the benefits of the merger are yet to materialize”.
Keki Mistry before the merger of HDFC Bank
Mistry, in a way, has been in the HDFC ecosystem even before the bank came into existence as we know it today. Joining Housing Development Finance Corporation Ltd in 1981 and rising to the role of CEO in 2010, the Mumbai-born and educated Parsi played a key role in transforming HDFC Ltd into a profitable mortgage machine with thin margins.
By the time of the mega HDFC bank merger in 2023, HDFC’s total assets were ~ ₹Rs 10.9 lakh crore and assets under management ₹7.2 lakh crore. Lower cost-to-income ratio generates net profit ₹26,160 crore in FY23.
Mistry’s HDFC Ltd relied more on wholesale lending rather than low-cost CASA deposits. This meant lower net interest margins (2% to 2.5%), but larger scale and lower operating costs, leading to higher returns on equity.
At the time of the HDFC merger, Mistry stepped away from day-to-day operations, advising the board and CEO Shashidhar Jagadeesan in a non-executive capacity. Now, he is back in the limelight for overseeing an institution that is grappling with merger issues.
HDFC Bank merger
While the strategic rationale for the merger was sound on paper – HDFC Bank’s CASA amount matched HDFC’s mortgage strength – the implementation fell short.
- Margin Squeeze: HDFC Bank consistently delivered a net interest margin of around 4% due to its huge depositor base, but the merger fundamentally changed this arithmetic. Absorbing HDFC’s high-cost wholesale borrowings – which increased HDFC Bank’s liabilities to 21% from 8% before the merger – narrowed NIM to 3.4%-3.5%.
- Loan-to-Deposit Ratio (LDR): The most visible financial metric after the merger was the increase in credit-to-deposit ratio, which increased to 110% in FY24. To avoid regulatory scrutiny, HDFC Bank increased its deposits ₹Rs 27.14 lakh crore to reduce LDR to 100% in FY20, but it came at the cost of ceding its mortgage market share to rivals ICICI Bank Ltd and State Bank of India.
- Dubai debacle: In late 2025, the Dubai Financial Services Authority imposed severe regulatory restrictions on HDFC Bank’s Dubai branch, barring it from onboarding new customers or promoting its financial services. The ban stems from an investigation into the alleged mis-selling of high-risk Credit Suisse Additional Tier-1 bonds.
mechanic back at work
Keki Mistry stepped into the interim presidency facing a dual mandate: to project complete stability and oversee a seamless transition after coming out of the shock.
Financials supported them- In FY25, HDFC Bank made consolidated net profit ₹70,790 crore, on net interest income of Rs 1,21,700 crore and net interest margin of 3.4-3.5% – but Chakraborty’s resignation exposes an unknown underbelly.
“Governance standards for the bank have historically been strong, but the current episode raises concerns about aspects about which we may have limited insight, but that may be important from a stock multiple perspective,” Kotak Institutional Equities wrote in a note.
JPMorgan, which has a “neutral” rating on HDFC Bank, said Chakraborty’s exit has weighed on sentiment as well as adding to macro headwinds. “We believe the stock is likely to trade weaker following the resignation announcement, the impact of which is magnified by the soft macro backdrop amid geopolitical uncertainties.”
Following the exit, Macquarie has removed HDFC Bank from its key buy list.
Institutional Investor Advisory Services, a proxy advisory firm that counts HDFC Bank among its shareholders, said the RBI should stay on top of the issue as HDFC Bank is a systemically important bank. “But since the RBI has appointed group insider Keki Mistry in his place, it could mean less for shareholders to worry about,” said Amit Tandon, CEO of IIAS.
Clearly, Mistry has a task at hand – reassuring institutional investors that the “practices and incidents” referred to in Chakraborty’s resignation letter are isolated and not systemic cracks. At least, the RBI is on their side.