A high-level independent probe has established that Chanda Kochhar, former chief of ICICI Bank, was guilty of violating the code of conduct at India’s second-biggest private lender.
Yesterday (Jan. 30), the Justice BN Srikrishna committee appointed by the bank last May submitted a report in which it accused Kochhar of nepotism. Immediately, the trailblazing banker’s resignation last October, which itself had followed months of extended leave, was treated as termination by the bank’s board of directors.
The committee’s findings vindicate India’s Central Bureau of Investigation (CBI), which had last week decided to book Kochhar and her husband Deepak, among others, for defrading the bank of $243 million (Rs1,724 crore).
Almost immediately after it filed a first information report in the case, the CBI was accused by none less than the union minister Arun Jaitley of indiscriminately naming highly respected bankers—from former ICICI Bank chief KV Kamath to Kochhar’s successor, Sandeep Bakhshi.
In a blog post written from the US, where he is undergoing a medical procedure, Jaitley dubbed the CBI’s move “investigative adventurism.” “If we include the entire who’s who of the banking industry—with or without evidence—what cause are we serving or actually hurting,” he wrote.
Now, the Srikrishna committee’s put the government firmly on the back foot.
In the meantime, the scam has also turned the spotlight on the role and conduct of a bunch of others in this messy affair.
The move to terminate Kochhar and claw back the bonuses she received between April 2009 and March 2018 is being viewed as an attempt by the ICICI Bank board to absolve itself of any wrong-doing.
Kochhar did not make adequate disclosures and kept the bank in the dark, a statement from the board said yesterday.
Clearly, this is a U-turn.
When, in 2016—and later in March 2018—a whistleblower alleged impropriety by ICICI Bank in the grant of loans to Videocon Industries, the board fiercely dismissed the nepotism charges against Kochhar as malicious rumours. Videocon is led by Venugopal Dhoot, a former business partner of Kochhar’s husband Deepak Kochhar.
The rush to give Kochhar, who was CEO then, a clean chit alarmed even the rating agencies. “The bank’s reluctance to support an independent probe has, in our opinion, created doubts over the strength of its corporate governance practices,” Fitch Ratings, a global rating agency, had said in a note in April 2018. “The investigation could also undermine investor confidence in the bank.”
Delaying the probe and letting Kochhar stay at the helm even months after the controversy erupted was the board’s failure.
MK Sharma was the board chairman when the scandal broke out. His term ended in June 2018 and Girish Chandra Chaturvedi, a former IAS officer, replaced him. Other members include Rama Bijapurkar, Uday Chitale, Dileep Choksi, Neelam Dhawan, Hari L Mundra, Radhakrishnan Nair, VK Sharma, and B Sriram. This is besides Bakhshi, the current managing director and CEO, and three executive directors—Vishakha Mulye, Vijay Chandok, and Anup Bagchi. The government nominee on the board is Lalit Kumar Chandel.
“The ICICI Bank board has been proved wrong on at least two counts. It was wrong in saying there was no conflict of interest and also in contending that all relevant disclosures had been made,” TT Ram Mohan, professor of finance and accounting at the Indian Institute of Management Ahmedabad, told Quartz.
Next in line is the bank’s loan-sanctioning committee, or credit committee. Six high-value loans sanctioned to various Videocon Group companies between June 2009 and October 2011 are now being questioned, according to the CBI case.
The agency has named a bunch of financial industry marquees who were part of ICICI Bank’s credit committee that sanctioned these loans:
- K Ramkumar, former executive director
- Sonjoy Chatterjee, chairman, Goldman Sachs India and formerly board member of ICICI Bank
- NS Kannan, managing director and CEO of ICICI Prudential Life and a former executive director of the bank
- Zarin Daruwala, CEO of Standard Chartered India
- Rajiv Sabharwal, CEO of Tata Capital who was earlier an executive director at ICICI
- Homi Khusrokhan, advisor to Tata Capital who served as an independent non-executive director of the bank
One can argue that the committee needs to be pulled up for the gaps in the process and that the due diligence done to grant loans was lacking.
However, it is also being construed as unwarranted witch-hunting.
“If we are going to just pull up everyone who was present at that time then that may not be the best solution,” said a senior industry person who is also on the board of one of the ICICI group companies, requesting anonymity.
But there are ways to avoid this tricky situation. “There is a case for having a civilian overseer committee at these investigating agencies. Something of the sort that we have seen at MI6—the external intelligence arm of the UK,” added Ram Mohan.
The Narendra Modi-led Indian government’s role, too, is questionable. After all, it has a nominee on the board. After the controversy broke, this nominee was inexplicably changed in the first week of April.
Jaitley’s comments calling out the CBI for the FIR only add to the mystery.
Experts say that since banking involves a lot of public trust, a thorough probe is an imperative. “It is still in the FIR stage which means they (the bankers named) will only be questioned and there is nothing wrong in that and so I don’t agree with the criticism,” said an analyst with a domestic brokerage house, requesting anonymity. “Investors, shareholders, and even the general public would be more confident if they are sure that all aspects have been looked into.”
In 2016, the whistleblower wrote to the prime minister’s office about the dealings in ICICI Bank. The government sounded out the banking regulator, whose probe, in turn, found no proof of a “quid pro quo” for Kochhar from Videocon.
The RBI said ICICI Bank was only a part of a consortium of lenders and, therefore, Kochhar cannot be singled out.
Now, that the bank’s external committee, as well as the CBI, has found her guilty, it may be time to revisit the regulator’s own investigation process.
Cyril Amarchand Mangaldas, one of India’s most esteemed law firms, had probed the entire issue in 2016 following the whistleblower’s complaint. The firm submitted its report in December 2016 stating there was no evidence of nepotism and conflict of interest.
After the Srikrishna committee was set up, Cyril Amarchand Mangaldas informed ICICI Bank it wanted to withdraw its earlier report.
It would probably be a sound idea to look into that report’s failings.