HDFC Bank's WTD expansion may set succession template for large banks

In a bourse filing on September 12, HDFC Bank explained its rationale for the step — “in order to have sharper synergy and oversight, including on the bank’s subsidiaries, as well as to have a larger pipeline for succession planning”. This builds on the Reserve Bank of India’s (RBI’s) 2023 stipulation that private banks must have at least two WTDs, including the managing director (MD) and chief executive officer (CEO), on their boards.

“The idea of creating a pool of WTDs for regulated entities (REs) will give executives exposure to the challenges and opportunities around strategy, governance, regulatory, legal, audit, and compliance at the board level,” said Rajesh Narain Gupta, founder and chairman, SNG & Partners, a law firm. “This will give a 360-degree perspective on running the organisation and add significant value to the business leader and CEO in making.”

Of late, succession planning in banks has hit the headlines with corner-office occupants moving on all of a sudden.

In the case of HDFC Bank, a D-SIB, wholesale changes at the top of its batting order came about after its MD & CEO Sashidhar Jagdishan announced in August that he was quitting. Kaizad Barucha, the deputy MD spoken of as a successor, was handicapped by the RBI’s 15-year cap (as a WTD, or 70 years, whichever is earlier; this also applies to MDs & CEOs of private banks). He was appointed to the board as WTD in 2013.

V S Rangan’s term as executive director (ED) was to end in November 2026 even as a successor to Bhavesh Zaveri, who retired as ED earlier in April this year, remained undecided. Nomination and remuneration committee members Sandeep Parekh and D Ranganathan, too, were near their term-limits (January 2027). Since then, of course, Anup Bagchi has been appointed boss at HDFC Bank; Rangan is now a WTD along with Jimmy Tata.

Earlier, there were sudden exits of Sumant Kathpalia at IndusInd Bank and Srikrishnan Hari Hara Sarma at Karnataka Bank. At Kotak Mahindra Bank, here was a change of guard after its MD and CEO, Ashok Vaswani, decided not to seek reappointment on the completion of his term on December 31, 2026. Vaswani assumed office on January 1, 2024, for a three-year term approved by the RBI in October 2023. Anup Kumar Saha has received RBI’s approval to take over as MD & CEO for a three-year term starting January 1, 2027.

The WTD route is now being looked at afresh to create leadership strength.

“Operating as a D-SIB and given its vast post-merger balance sheet, HDFC Bank may want to revisit its executive architecture,” said Nitin Potdar, a senior corporate lawyer and founder of Chambers of Nitin Potdar. “Given the RBI’s stringent mandate for microscopic governance, elevating multi-vertical risk, IT, and compliance functions, adding a fifth WTD     seems fully justified.” 

Crucially, this expansion yields a vital strategic dividend: “It structurally broadens the bank's internal bench of board-level talent, ensuring a robust, cross-functional pool of future MD & CEOs who can navigate strict regulatory tenure caps.”

“HDFC Bank’s move highlights a critical regulatory objective. When the RBI prescribed the WTD guidelines for private banks in 2023, it intended to build a deeper institutional bench, not just solve for one-off succession,” observed Ravi Duvvuru, a member of the RBI’s advisory group on regulation and founder and designated director, Duvvuru & Reddy LLP. 

“Broad adoption of WTDs creates a mature executive market where leaders are thoroughly tested in risk, compliance, and governance before taking the helm.”

How many WTDs are enough? “While HDFC Bank may merit having five WTDs due to its size and scale, it may not be the case with every other bank,” said R Gurumurthy, who serves on the boards of Axis Capital and Religare and is former head-governance at RBL Bank. 

It’s worth noting that the RBI also requires at least half the attendees in a board meeting to be independent directors (IDs). 

How do you get top-class IDs onboard?

The remuneration paid to them is not commensurate with the time spent on the board, although the RBI has hiked the fixed remuneration ceiling to ₹30 lakh annually, with sitting fees on top. One route, suggested Divyanshu Pandey, founder at C B Pandey & Associates, “Is to go back to the core and groom a second level of management of those who did not qualify to rise to senior positions in a bank, but have great knowledge to be appointed as an ID.”

There is one more facet to what HDFC Bank has done. The new WTD will be in charge of the bank’s subsidiaries. This mirrors the position at the State Bank of India (SBI), which has a dedicated MD to look after its subsidiaries. It also tells you where we are now: The larger banks are financial conglomerates (SBI being the first to answer to such a profile) with business lines cutting across mutual funds (MFs), insurance, and investment banking (i-banking). 

Seen in this context, WTDs in private banks become an industry-wide talent pool, mirroring the state-run undertakings model where a WTD from one institution can seamlessly transition to lead another.

That leads us to another aspect: The RBI’s four-tier scale-based regulatory (SBR) approach, which was introduced to cut out arbitrage between banks and non-banking financial companies (NBFCs) as it was seen as being detrimental to orderly growth and systemic stability. 

The layers are: Base (NBFCs with assets of ₹1,000 crore and below); middle (assets of  ₹1,000 crore and above); upper (to be specifically identified); and top (to be left empty, unless the banking regulator feels an NBFC poses potential systemic risk).

The idea behind this architecture is that it enhances transparency and governance while not burdening them with higher-level regulations.

Now, the upper-layer NBFCs are financial conglomerates too and, like the bigger banks, have interests in MF, insurance, and i-banking. In March this year, the agenda of a Department of Financial Services meeting on NBFCs, chaired by then finance secretary, M Nagaraju, included the following: “governance reforms to include better leadership rotation” and “clarity on NBFCs as potential banks”.

Is there a case for upper-layer NBFCs to have more WTDs? 

“As a good practice, it will be desirable for upper-layer NBFCs to have multiple WTDs. It will give them exposure and increase the bench strength for future elevation. In case making multiple WTDs is not possible they could be made permanent invitees to the board,” said Vimal Bhandari, chairman of HDFC Mutual Fund Trustee Company and an ID on the board of Escorts Kubota’s, having served RBL Bank in a similar capacity.

“This will give them a perspective on how a board works and sensitise them to leadership expectations; as and when possible, they could be appointed WTDs”. And “at a time when the leadership pool across regulated entities needs to be wid­ened, such an approach can create bench strength who can move across REs.” 

Simply put, you can create a talent pool at the firm- and systemic level.

That said, Gurumurthy pointed to the fact that “given that external CEOs are probably chosen more often now, it may be better to consider this bench as a potential pipeline for CEOs of other banks too”. 

“While it may not necessarily form the pool for choosing an MD & CEO, it will most certainly be the one if anyone is needed to occupy that chair on an emergency basis. It’s a good training ground for a future CEO role though, certainly,” said Gurumurthy.