Governance experts have called on HDFC Bank, India's largest private sector bank, to reinforce its corporate governance framework in order to restore long-term investor confidence.

Amit Tandon, Founder and Managing Director of Institutional Investor Advisory Services (IiAS), a leading proxy advisory firm, and Ashvin Parekh, Managing Partner of Ashvin Parekh Advisory Service, offered their perspectives on the steps the bank's board should take to strengthen oversight and accountability.

Both experts emphasized that robust governance is determined by the quality of processes as much as by the outcomes those processes produce. A board's ability to distinguish between commercial overreach — where business decisions may overstep prudent boundaries — and genuine misconduct is critical, they noted. This distinction carries significant implications for how investors, regulators, and the broader market evaluate the institution's integrity and decision-making culture.

The discussion comes amid heightened scrutiny of board-level oversight at major Indian corporations, where institutional investors have increasingly demanded greater transparency, independent evaluation, and timely disclosure of material developments. India's securities regulator, the Securities and Exchange Board of India (SEBI), has progressively tightened corporate governance norms under its Listing Obligations and Disclosure Requirements (LODR) framework, while the Reserve Bank of India (RBI) maintains its own set of governance guidelines specifically applicable to scheduled commercial banks, reinforcing the dual regulatory expectations on institutions like HDFC Bank.

HDFC Bank, which completed its landmark merger with parent Housing Development Finance Corporation (HDFC) in July 2022, remains a bellwether for India's banking sector. The merger created one of the largest financial services entities in the country by market capitalization, further raising the stakes for governance standards at the institution. The combined entity's weight in benchmark indices means that its governance posture has outsized implications for a wide range of domestic and foreign institutional portfolios.

To rebuild credibility with long-term investors, the experts suggested that HDFC Bank's board must not only address any identified lapses but also demonstrate, through visible and well-communicated process improvements, that its governance mechanisms are equipped to prevent recurrence.

Source: CNBC-TV18 Markets