Even as Chanda Kochhar, the managing director and chief executive of the country’s largest private sector lender ICICI Bank, goes on leave until the completion of an ongoing enquiry by a panel headed by former Supreme Court judge BN Srikrishna, the controversy relating to violation of corporate governance norms by its head honcho looms large over the bank.
On June 19, the board of ICICI Bank made a formal announcement saying that Kochhar “has decided to go on leave till the completion of the enquiry.” The same board had been strongly favouring Kochhar since the start of the controversy suggesting that her husband Deepak Kochhar’s firm NuPower Renewables had received an investment from a Videocon group company as a quid pro quo for a loan given to the company by the bank. Videocon group had taken loan from ICICI Bank in past and Chanda Kochhar was part of the credit committee which had sanctioned the loan. The board had then brushed aside the allegations levelled against Chanda Kochhar of violation of corporate governance norms, terming them as ‘malicious and unfounded’ and thus reposing its full faith in Chanda Kochhar.
A similar allegation was levelled against the bank once again by a whistle blower, when ICICI Bank’s name figured in another case in which the bank had allegedly favoured Essar, a Ruia-owned group, for round-tripping investment into NuPower. As per a media report, an Essar group promoters’ kin had invested ₹325 crore into NuPower through his Mauritius-based firm Firstland Holdings. The investment was done soon after the Essar group’s venture, Essar Steel Minnestoa LLC was awarded a loan amounting to US $530 million by the ICICI-led consortium of banks, only for the loan to turn NPA afterwards.
After Deepak Kochhar set up NuPower Renewables along with Videocon’s Venugopal Dhoot, the latter had then resigned from his position as director of NuPower in 2009 and transferred 25,000 shares to Deepak for ₹2.5 lakh. Again, in the year 2010, Dhoot-owned firm Supreme Energy provided finance worth ₹64 crore to NuPower. Then in 2012, ICICI Bank sanctioned ₹3250 crore loan to the Videocon group through a consortium of banks which was led by State Bank of India.
Market regulator Securities and Exchange Board of India (Sebi) had also queried the bank on the contentious issue last month. This came after beginning of proceedings against the bank by the market regulator for non-disclosure of information into the episode pertaining to alleged conflict of interest in the grant of loans to Videocon group.
Union finance minister Piyush Goyal, while interacting with the media in Mumbai recently, had only said that ‘the law of the land will take its own course.’ He went on to say that ICICI Bank is a good bank as it has got robust processes and hence there was no cause of concern for any of the stakeholders. However, the government nominee and the LIC chairman had suddenly stopped attending the board meeting of the bank, taking everyone by surprise
Initially, the development was kept under wraps by the bank and the board came out in support of Chanda Kochhar. However, when the controversy started blowing out of proportion, the board decided to pull the rug from under Kochhar’s feet, which was preceded by the probe into the episode by CBI.
The issue doesn’t end here. The RBI did begin a probe into the episode once the matter was referred to it by the PMO. But, it didn’t find any fault with the bank in the detailed scrutiny which it had conducted to probe allegations of impropriety by ICICI in extending the loan to Videocon group. The RBI probe couldn’t establish any ‘quid pro quo’ or reciprocal benefit.
The board has now elevated Sandeep Bakshi, who was heading the bank’s life insurance arm ICICI Prudential, as the chief operating officer (COO) of the bank for a term of five years and to look the affairs of the bank in Kochhar’s absence. It is rumoured that Bakshi will take over the bank’s MD and CEO post from Kochhar in future.
Now, the moot question arises, why is the CBI investigation into the case still in its preliminary stage? Chanda Kochhar, who was appointed to the post of MD and CEO by her mentor and predecessor, KV Kamath, during the UPA government, is known to have high political connections. This is visible by the fact that the current BJP-led NDA government has been going slow on the investigation.
Union finance minister Piyush Goyal, while interacting with the media in Mumbai recently, had only said that ‘the law of the land will take its own course.’ He went on to say that ICICI Bank is a good bank as it has got robust processes and hence there was no cause of concern for any of the stakeholders. However, the government nominee and the LIC chairman had suddenly stopped attending the board meeting of the bank, taking everyone by surprise.
It was only when their absence started making media headlines that the duo sought an audience with the top management of the bank to discuss the ongoing controversy and how to win back investors’ confidence. One fails to understand why the Modi government has been taking the entire ICICI Bank episode so lightly.
As the current chairman of the bank MK Sharma completes his tenure this month-end, the hunt will shortly begin to find his replacement. It is rumoured that former CMD of Bank of Baroda, MD Mallya who joined the bank’s board recently as an independent director, may replace Sharma, though there is no official word from the bank on the issue as yet. One can only hope that once the new top management team is in place at the helm of affairs of the bank, it will work hard to bring back normalcy.