Why HDFC Bank Shares Lag As Banking Sector Surges Amid Forex Swap Facility Boost

Why HDFC Bank Shares Lag As Banking Sector Surges Amid Forex Swap Facility Boost​

Private lender HDFC Bank shares stood out as an anomaly on June 9, remaining flat despite a significant rally across the banking sector. This performance difference comes as the bank awaits crucial independent legal reviews concerning its corporate governance matters.

The broader banking indices surged following the Reserve Bank of India (RBI) announcement of a concessional forex swap facility. Banks now have access to this facility, which is intended to boost foreign inflows into Asia's third-largest economy, especially given global uncertainties stemming from prolonged international tensions.

RBI Forex Swap Facility Boosts Sector Rally​

The Nifty Bank index advanced by 1.6% at 12:55 pm on Tuesday, making banks among the top sectoral gainers. This performance followed a period of volatility for the sector, which had seen gains of 0.4% on Friday and losses of 0.8% on Monday.

The RBI-backed swap facility will be available until September 30. It is designed to compensate lenders for hedging costs associated with three- to five-year foreign currency non-resident deposits. Experts suggest this measure could drive overseas borrowings ranging from $25 billion to $30 billion, according to Citi Research.

Jefferies anticipates a much larger influx, projecting overall inflows between $50 billion and $70 billion after the RBI allowed banks to offer leverage on deposits by non-residents. ICICI Securities noted that this development should stabilize the liability profile of banks by increasing stable medium-term foreign currency deposits.

Governance Uncertainty Weighs On HDFC Stock Performance​

HDFC Bank's stock performance has been overshadowed by internal matters, as it continues to navigate a period of institutional review. The bank had commissioned an independent legal review following the abrupt departure of Chairman Atanu Chakraborty in March.

Chakraborty’s resignation was linked to clashing values and ethical concerns regarding governance issues within the institution. This ongoing review is expected to address uncertainties surrounding the reappointment of Chief Executive Officer Sasidhar Jagdishan, whose term is set to conclude in October.

The sector rally contrasts sharply with HDFC Bank's recent internal decisions, as it independently announced adjustments to its lending rates. While banks face increased competition in raising deposits due to households shifting assets toward equities, the bank proceeded with rate hikes.

Key Updates on MCLR and Lending Rates​

HDFC Bank recently adjusted the Marginal Cost of funds-based Lending Rate (MCLR) by up to 10 basis points across various tenors, effective June 8, 2026. This move is part of the bank’s internal adjustments amid prevailing market conditions.

For loans with a maturity of two years, the maximum hike was set at 10 basis points, taking the rate to 8.55% from the previous 8.45%. The benchmark one-year MCLR has also been revised upward by 5 basis points to 8.4%.

Other tenor adjustments included overnight, three-month, six-month, and three-year MCLRs, which were all raised by 5 basis points to 8.1%, 8.20%, 8.35%, and 8.65%, respectively. This rate hike occurred just days after the Reserve Bank maintained its interest rates amidst concerns over rising energy prices and supply disruptions in West Asia.