Chanda Kochhar Misled RBI on Unwarranted Loan to Essar: Report
ICICI Bank disbursed a loan worth $365 million to Essar Steel Minnesota ignoring RBI’s recommendations and red flags
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Months after former MD and CEO of ICICI Bank Chanda Kochhar was found guilty in the Videocon loan case, a report now suggests that she allegedly 'misled' the Reserve Bank of India (RBI) in the case of another loan disbursed to the Essar group.
A report by the The Indian Express suggests that in 2014, ICICI Bank disbursed a loan worth $365 million to a Mauritius-based holding company of Essar Steel Minnesota LLC, on grounds of the company expanding its project capacity. The central bank however, had raised questions regarding the loan approval, the report says.
How Did Kochhar ‘Mislead’ RBI?
RBI reportedly said that the second loan was disbursed to pay off an earlier loan and recommended classifying the loan to Essar Steel Minnesota as a “sub-standard asset”.
The report says that despite RBI's mandate, ICICI Bank, in September 2014 said that while it had approved the company's capacity increase, it had not “participated in any additional funding.”
However, The Indian Express report suggests that 'records' reveal that the loan was indeed extended in June 2014 and Kochhar was part of the credit committee meeting that gave the loan.
The report further quotes 'investigators' as saying that Kochhar made “inaccurate and misleading statements” to the RBI and thereby violated the Companies Act 2013 and SEBI listing norms.
Kochhar Ignored Other Red Flags Too
Apart from providing false information to the central bank, ICICI Bank under Kochhar also ignored several other red flags in the matter.
- The report says that records show ICICI Bank ignored an external complaint against the Essar Group, negative credit ratings by agencies and quarterly waivers of numerous defaults sought by the group from the bank.
- The bank did not take any action even after receiving a written complaint in April 2013, which alleged that no other financial institution was willing to lend to the company for Essar Steel Minnesota.
- Between 2012 and 2014, ICICI Bank went along with repeated alleged breach of loan covenants by Essar Steel Minnesota.
- The CFO of Essar Steel Minnesota in fact wrote to ICICI Bank on 1 April 2014 requesting waivers for breaches like failing to provide timely audited financial statements and end-use certificates and late payment of interest.
In a response to The Indian Express, Essar Group has said that the loans taken were 'used in full compliance' and no investigating authority has approached the company, in this regard. It has further said that the company has no dues to ICICI Bank and an auditor's certificate was also provided to the bank.
(With inputs from The Indian Express)
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