HDFC Bank in focus: RBI dismisses 'window dressing' worries; Rajiv Kumar says balance sheet remains 'pristine'

HDFC Bank shares are likely to remain in the spotlight on Thursday, August 6, after RBI Governor Sanjay Malhotra said the central bank does not see any major concern over allegations of banks resorting to "window dressing".

Meanwhile, HDFC Bank Chairman Rajiv Kumar affirmed that the lender's balance sheet remains "very pristine" and governance standards are intact.

These changes are often reversed soon after the reporting date, meaning they do not reflect the bank's underlying financial condition.

What RBI said

The Reserve Bank of India (RBI) on Wednesday said it does not see any major concern over allegations that banks are resorting to 'window dressing', asserting that its supervisory mechanism is robust enough to detect and address any violations.

RBI Governor Sanjay Malhotra said window dressing, wherein a lender spruces up numbers on key metrics like deposits ahead of the close of a quarter to show strong results, does not provide any real benefit to regulated entities as stakeholders and customers are well aware of the underlying financial position of banks.

"Nobody gains anything from window dressing. Even if a bank or any regulated entity resorts to such practices, today's stakeholders and customers understand that it neither changes the underlying reality nor has any material impact on the balance sheet," Malhotra said during the post-policy press conference.

Malhotra said the central bank's instructions on such practices are clear and supervisory officers closely monitor compliance.

"If any regulated entity is found to have deviated from the rules or engaged in such practices, we take appropriate action," the governor added.

HDFC Bank's non-executive chairman Rajiv Kumar's statement

The lender's non-executive chairman Rajiv Kumar on Wednesday affirmed that there are no "ethics or values" based challenges at the country's largest private sector lender and vowed to preserve shareholders' trust with the highest standards of governance.

Kumar, a career bureaucrat who took over the assignment amid a tumultuous time for the bank after the sudden exit of Atanu Chakraborty from the seat, acknowledged that there is a lot of "dust" in the air and sought to clear what he called the doubts on the horizon.

"Systematically, there is nothing which has the challenge on either ethical or value parameters. Things are fine; the balance sheet is very pristine," he told shareholders while officiating at the lender's 32nd annual general meeting held virtually.

It can be recalled that Chakraborty had resigned in March this year citing concerns on ethics and values, leading to questions among all stakeholders.

After a short stint by Keki Mistry in the interim, Kumar, who has also served as the chief election commissioner, was appointed as the non-executive chairman of the lender, amid questions about ethics.

The bank board has found certain wrong practices being followed to tap high-value deposits from MSRDC and also fined the management led by managing director and chief executive Sashidharan Jagdishan while clearing them of any mala fide intent.

Responding to shareholder concerns on value creation and specifically the bank's merger with mortgage major parent HDFC dragging down performance, Kumar promised to lift the share of the low-cost current and saving account deposits and consequently the net interest margins as well over the next few quarters.

HDFC Bank Q1 FY27 earnings

HDFC Bank reported a 5% increase in standalone net profit to ₹19,060 crore for the June quarter of the fiscal year 2026-27 (FY27).

The country's biggest private sector lender had earned a net profit of ₹18,155 crore in the year-ago period.

However, the total income of the bank in the quarter under review dropped to ₹92,184 crore from ₹99,200 crore in the same period a year ago, HDFC Bank said in a regulatory filing.

The lender's interest income increased to ₹79,363 crore from ₹77,470 crore in the same quarter a year ago.

During the period, operating profit of the bank declined to ₹28,169 crore, as compared to ₹35,734 crore in the same quarter a year ago.

Net interest income (NII) grew 7% to ₹33,530 crore from ₹31,440 crore for the June quarter, it said.

Net interest margin (NIM) came in at 3.26% on total assets and 3% based on interest earning assets.

The bank's asset quality exhibited improvement as gross non-performing assets (NPAs) declined to 1.17% of gross advances at the end of the June quarter, from 1.4% a year ago.