ICICI’s Chanda Kochhar goes on leave; she might find it hard to return

Has the board of ICICI Bank told its Managing Director and CEO, Chanda Kochhar to go on leave pending an inquiry into allegations of impropriety? Shares of the private bank rose 5% to hit the day’s high of ₹299.95 following a lead story in the Mint newspaper that she has been asked to proceed on “indefinite” leave. But the stock gave up much of the gains and settled closer to the day’s low after the bank clarified that she was on “annual leave which was planned in advance” and not persuaded to make herself scarce. (A journalist who observes the banking sector closely said this was just a face-saver). It also denied the appointment of a search committee to find a successor.

On Wednesday, the board had informed the stock exchanges that it had decided to institute an inquiry “headed by an independent and credible person” to examine a whistleblower’s allegations that Kochhar has not adhered to the bank’s code of conduct and had violated conflict of interest rules. The inquiry will be “comprehensive,” the statement said, and would include the use of forensic tools, email reviews and recording of statements. It would also inquire into allegations that Kochhar profited from her dealings with customers and borrowers.

On May 11, Arvind Gupta, an activist shareholder had written to the Prime Minister making fresh allegations about deals between Kochhar’s husband, Deepak and the Essar group.

In March, Indian Express had reported that through a set of transactions between 2008 and 2013, Deepak Kochhar had acquired full control for ₹9 lakh of a company which he had jointly set up with Venugopal Dhoot of the Videocon group and to which the latter had lent ₹64 crore in debentures that could be converted into shares.

Indian Express alleged that subsequently, ICICI Bank had lent to Videocon group companies and a substantial portion of that loan had turned bad.

The bank’s board clarified that ICICI Bank was part of a consortium of banks which had lent to the Videocon group’s oil and gas exploration business whose capital expenditure was ₹40,000 crore. It had given ₹3,250 crore as part of that team of which ₹2,810 crore had not been repaid. Its total exposure to the group was ₹2,849 crore and this had been classified as a non-performing asset in 2017.

Dhoot also denied any wrongdoing.

A few days later the paper reported that Kochhar’s brother-in-law in Singapore had advised seven borrowers of ICICI Bank on restructuring their foreign currency-denominated debt deals worth US$1.7 billion through his company, Avista Advisory.

The board stood by Kochhar. But shouldn’t she have alerted the bank about her husband’s and relative’s dealings with its borrowers? She might have adhered to the letter of the code of conduct, but did she honour the spirit?

The fact that the stock market cheered news that Kochhar had gone on leave indicates that investors have little faith in boards and top managers. Even if an inquiry clears her, it will be met with scepticism.

Cronyism is rampant in Indian industry.

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